Understanding the Basics of the ASX (Australian Securities Exchange)

Australian Securities Exchange
Australian Securities Exchange

Australian Securities Exchange (ASX) is the largest Australian stock market offering a platform for equities, trusts, and different companies for issuing securities to the general public. This way, the companies can generate funds to expand their business or to start a new set-up. 

Additionally, the investors also get profits or insight into the business model of that particular business. There are over 2,000 companies registered in the ASX, allowing starters or experienced investors to generate revenue by stock trading. Here is all about the Australian Securities Exchange (ASX), its different types, and the trading system within the ASX. 

Read More: Beginner’s Guide to Investing in the Australian Stock Market

What is the Australian Securities Exchange?

Australian Securities Exchange (ASX) is the largest Australian security exchange forum. Different public entities get a chance to trade their shares and stocks via this platform. They can raise funds by selling their shares, and shareholders can earn money through capital gains and learning the business model. 

The Australian Stock Exchange and Sydney Futures Exchange were merged in 2006 and the Australian Securities Exchange (ASX) was founded. The ASX is one of the world’s top 10 exchange groups for capitalization. 

Understanding the Australian Securities Exchange (ASX)

ASX is Australia’s leading stock market operator and payment facilitator that provides educational materials to investors and shareholders. ASX’s headquarters is in Sydney, Australia, and governs the rules and regulations for stock exchange throughout the country. 

ASX has been among the world’s top-ranking exchanges and has been leading the stock trading world of Australia since its origin. Some other giant exchange industries of the world include the Nasdaq, New York Stock Exchange (NYSE), Tokyo Stock Exchange (TSE), and London Stock Exchange (LSE). 

Learning the basics and listing requirements for each industry is necessary. Without understanding them, one cannot invest in any of these markets. 

History of the Australian Securities Exchange:

Australian Security Exchange, sometimes called the Sydney Futures Exchange (SFX), is a part of the same industry. SFX was merged with the ASX in 2006. However, the industrial name of this exchange is ASX. Helen Lofthouse is the current CEO of the Australian Securities Exchange, and the market cap of the exchange is about 2.3 trillion (up to June 2022). Here is a brief history of the ASX; 

  • The story of the SFX foundation started with the emergence of Australia’s first exchange in 1861. This was the year the world started its journey towards stock trading after the Gold Rush. 
  • In 1937, a major movement towards the origin of SFX was made with the formation of the Australian Associated Stock Exchange (AASE). AASE properly formalized the rules and regulations for stock listings and stockbrokers. This way, the country moved towards a well-organized stock trading system. 
  • In 1987, the Australian Stock Exchange (ASX) was finally founded and merged all the major stock exchanges of the country into a single forum. 
  • In 1990, the warrants market expanded the exchange system further that provided the investors a more hedging and speculating option. 
  • In 1998, ASX’s demutualization and public listing was introduced. This step was one of the major movements towards the modern and a more transparent governance system within the stock market. 
YearHistory
1861emergence of Australia’s first exchange
1937SFX was made with the formation of AASE
1987merged all the major stock exchanges of the country into a single forum. 
1990the warrants market expanded the exchange system
1998ASX’s demutualization and public listing was introduced
2006SFX was merged with the ASX
Australian Securities Exchange History
Basics of the ASX – How to Invest in Australia

Opening Times of ASX

ASX follows the standard opening and closing routine. So, it remains open throughout the week, i.e. Monday to Friday. But it remains closed on the global public holidays. Here are the holidays on the ASX; 

  • New Year’s Day (1 January)
  • Australia Day (26 January)
  • Good Friday (varies each year)
  • Easter Monday
  • Anzac day (25 April)
  • Queen’s birthday (June)
  • Christmas Day (25 December)
  • Boxing Day (26 December)

Types of ASX Markets

ASX follows the global standards for categorization of its markets. By following the Global Industry Classification Standard (GICS), ASX is divided into the following categories; 

  • Sectors: 11
  • Industry Groups: 25
  • Industries: 77 
  • Sub-Industries: 174

Here are different types of ASX markets or sectors and an investor can choose any of them according to his interest or convenience; 

  1. Bond market
  2. Derivatives market
  3. Equity market
  4. Financial development
  5. Foreign exchange market
  6. Funds management

ASX Indices

Indices in ASX are the units that measure the performance for different stocks or segments within the Australian stock market. There are different indices for ASX market but the most important one is A&P or ASX 200. This induce is an index that governs the performance of about 200 stock companies listed on the forum of ASX. It’s the most authentic and that’s why most used indice in the ASX and investors track the market performance through this index. 

The operator of the Australian Securities Exchange (ASX) calculates and publish Indices for different companies within the ASX. Here are the other important indices of the ASX; 

  • S&P/ASX 50
  • S&P/ASX Small Ordinaries
  • S&P/ASX All Technology Index
  • S&P/ASX 200 Financials Index
  • S&P/ASX 200 Energy Index

All these indices are important because they help the investors keep a track of the overall performance of different industries within ASX. So, they can make an informed decision before investing in any stock. 

How Indices are Calculated and Used? 

Capitalization-weighted index method is the most commonly used method to calculate different indices for ASX. According to this index, the companies with largest market capitalisation impact the stock market most than those with lower capitalisation. 

The ASX indices can be used for different purposes by investors and financial analysts, like; 

  • To track the performance of different segments
  • To govern the performance of investment portfolios
  • To create products for investment

ASX’s Trading Systems

ASX trading system operates on the two major mechanisms i.e ASX Trade and ASX Trade24. Here a little introduction to both these systems. 

1. ASX Trade

ASX trade system is mostly used to trade in equity securities within the Australian stock market. The overall trade is based on a system called NASDAQ OMX trade system. ASX trade system is said to be the world’s fastest growing stock trading system. 

2. ASX Trade24

Unlike the ASX trade system, the ASX Trade24 is used to trade in derivatives securities. It has gateways to the the global stock trading forums, like that of London and New York. This system remains open for 24 hours, so it’s great if you want to maintain two trading days with a single system. 

Why list on the Australian Securities Exchange (ASX)?

ASX is a great forum for small industries or starters and mid cap industries to raise capital for their companies. So, this market offers an opportunity for the investors as well as companies to generate revenue at the initial investment stage. Moreover, ASX is great for future growth funds. Here are some reasons for why you should list on ASX; 

  • ASX provides the currency to the acquisitions in a more diversified and liquid share capital. This feature of the ASX helps the entireties in external growth. 
  • ASX has a higher percentage of the investors profiles, so new cap companies can acces to the investors quickly. 
  • ASX is a transparent and liquid trade system that increases the access to the global capital quickly.
  • Investors and companies can analyse the market themselves by using different indices within the same niche.
  • You will need greater listing documentation and reportings that makes the trade very efficient. 
  • ASX exposes different companies to the secondary markets thus helping them gain popularity and raise funds via single forum. 
  • ASX’s compliance and listing procedure improves the perception of even the startups. 
  • It has high media exposure, providing a chance to get caught by investors eyes. 

Australian Securities Exchange (ASX) and Electronic Trading

ASX is an integrated exchange with a global fame. It offers an opportunity for companies and industries to raise funds via primary and secondary market services. It includes the raising, allocation and hedging of capital flows within the industry. 

ASX and Education

ASX educates the new companies and investors through its online educational webinars. The webinars include the topics that matter to ASX-listed companies and their advisers. So, newly emerged entities can learn how to list their stocks on the ASX market to raise the funds. 

ASX Careers

The ASX offers multiple career opportunity for different highly educated people from the world. Most of its opportunities are Sydney oriented. Here are the most common opportunities you will find in ASX; 

  • Compliance advisors, 
  • Data engineers, 
  • Marketing managers
  • Network engineers

Conclusion

Australian Security Exchange (ASX) is the 5th largest exchanges of the world that globally helps the companies and investors. Investors can get profit plus an insight into the business models. While companies can raise funds for different purposes by listing their stocks on the ASX. 

However, there are certain things that must be cleared before you step into any exchange, including ASX. So, ensure you learn the basics and understand the rules and regulations for listing and investing in ASX stocks. Moreover, keep an eye on the consequences and other considerations of the market to be safe as much as possible in ever changing world of trade. Hopefully, you’ll get an insight into ASX through this guide! 

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