Australian Securities Exchange facts for kids

The Australian Securities Exchange (ASX) is a company in Australia that runs the country's main stock market. It was created on 1 April 1987, when six smaller stock exchanges from different Australian states joined together. Later, in 2006, it also merged with the Sydney Futures Exchange.

Today, the ASX is one of the biggest stock exchange groups in the world, and the largest in the southern part of the world. Each day, about A$4.685 billion worth of shares are traded on it. The total value of all companies listed on the ASX is around A$1.6 trillion.

ASX Clear is like a special helper that makes sure all share trades are completed correctly and safely.

What is the ASX?

Sydney Exchange Centre entrance

The ASX Group does many important things. It runs the market where shares are bought and sold, helps clear and settle trades (making sure money and shares go to the right people), and helps manage payment systems. It also checks that companies follow the rules and helps teach people about investing.

How are Australia's markets regulated?

Several groups help make sure the ASX and its markets are fair and safe:

• The Australian Securities & Investments Commission (ASIC) watches over trading to make sure everything is done correctly. They also check that the ASX itself follows its own rules.
• ASX Compliance is a part of ASX that makes sure companies listed on the exchange follow the rules.
• The Reserve Bank of Australia (RBA) checks the ASX's systems for clearing and settling trades to keep Australia's financial system stable.

What can you trade on the ASX?

You can trade many different things on the ASX, including:

• Shares (parts of a company)
• Futures (agreements to buy or sell something at a future date)
• Options (the right, but not the obligation, to buy or sell something)
• Exchange-traded funds (ETFs), which are like baskets of different investments
• Real estate investment trusts (REITs), which let you invest in property

Some of the biggest companies traded on the ASX include BHP, Commonwealth Bank, Westpac, Telstra, Rio Tinto, National Australia Bank and Australia & New Zealand Banking Group.

The main way to see how the market is doing is by looking at the S&P/ASX 200 index. This index includes the top 200 companies listed on the ASX. There are also other indexes like the S&P/ASX 100 and S&P/ASX 50 for even bigger companies.

History of the ASX

The Sydney Stock Exchange building in 1872

The Sydney Stock Exchange building in 1959

Sydney Exchange Square

Sydney Exchange Square entrance

The ASX started a long time ago, in the mid-1800s. Back then, there were six separate stock exchanges in different Australian cities like Melbourne (1861) and Sydney (1871).

In 1937, these separate exchanges formed a group called the Australian Associated Stock Exchanges (AASE). This group helped create common rules for all the exchanges, making trading easier across Australia.

For many years, trading happened in person. Employees called "chalkies" would write prices on blackboards. But in 1987, the six exchanges officially joined to form the Australian Stock Exchange Limited (ASX). This was a big change, and trading became electronic.

In 1998, the ASX itself became a company listed on its own market. This was the first time an exchange in the world did this! Then, in 2006, the ASX merged with the Sydney Futures Exchange.

Important moments in ASX history

• 1861: Australia's first stock exchange opened in Melbourne, ten years after the Gold Rush began.
• 1871: The Australian Gas Light Company became the second company to be listed on the Sydney Stock Exchange.
• 1885: The Broken Hill Proprietary Company Limited (BHP), a big mining company, listed on the Melbourne Stock Exchange.
• 1937: The Australian Associated Stock Exchanges (AASE) was officially formed, bringing together the state exchanges.
• 1938: The first share price index was published, showing how share prices were changing.
• 1939: The Sydney Stock Exchange closed for the first time because of World War II.
• 1960: The Sydney Futures Exchange started trading, helping wool traders manage risks.
• 1969–1970: A mining boom and crash, called the Poseidon bubble, led to new rules for companies and markets.
• 1980: Separate stock exchange indexes for Melbourne and Sydney were replaced by national Australian Stock Exchange indexes.
• 1984: Rules about how much brokers could charge were removed, leading to lower fees.
• 1987: The Australian Stock Exchange Limited (ASX) was officially formed, combining all the state exchanges. Electronic trading also began, replacing the old system of "chalkies" writing on blackboards.
• 1998: The ASX became a listed company on its own market, a first for stock exchanges worldwide.
• 2006: The ASX merged with the Sydney Futures Exchange.

How does trading work?

The ASX Group uses two main computer systems for trading:

• ASX Trade is for buying and selling shares. It's a very fast system, helping trades happen in tiny fractions of a second.
• ASX Trade24 is for trading futures and other complex financial products. It allows trading for 24 hours a day, with access points around the world.

When is the market open?

The ASX is open for trading from Monday to Friday. It closes on national public holidays like New Year's Day, Australia Day, Good Friday, Easter Monday, Anzac Day, Queen's Birthday, Christmas Day, and Boxing Day.

On a normal trading day, there's a pre-market session from 7:00 am to 10:00 am AEST. The main trading session runs from 10:00 am to 4:00 pm AEST. The market opens gradually over the first ten minutes, and there's a special auction at the end of the day to set closing prices.

How shares are owned and transferred

When you own shares in Australia, you don't usually get a paper certificate. Instead, your shares are recorded electronically in one of two ways:

• CHESS (Clearing House Electronic Sub-register System): Your broker helps you set this up. You get a "holder identification number" (HIN), and you receive monthly statements showing your shares.
• Issuer-sponsored: The company whose shares you own keeps a record of your ownership. You get a "security-holder reference number" (SRN).

You can easily move your shares between these two systems or between different brokers using electronic messages.

Short selling

Short selling is a way to try and make money if you think a company's share price will go down. It involves selling shares you don't own, hoping to buy them back later at a lower price.

The ASX allows short selling for certain stocks, but with rules. Brokers must report all short sales, and the ASX makes this information public. Many brokers don't offer short selling to small investors because it can be risky.

In 2008, during a big global financial crisis, short selling was temporarily stopped to help keep the market stable. It was allowed again in 2009.

Options

Options are financial tools that give you the right, but not the obligation, to buy or sell shares at a certain price by a certain date. They are traded on the ASX for leading companies.

Because options can be complex and risky, brokers must check that clients understand them before they are allowed to trade. If you sell options, you might need to put up some money as a guarantee.

Interest rate market

The ASX also has a market for corporate bonds and other investments that pay interest. These are traded and settled in the same way as shares. The ASX provides information to help people compare these investments, like when they will mature and how much interest they pay.

Futures

The Sydney Futures Exchange (SFE), now part of ASX, is a big market for derivatives. These are financial contracts whose value comes from an underlying asset, like interest rates, shares, or currencies. Some popular futures products include:

• SPI 200 Futures: These are based on the S&P/ASX 200 index.
• AU 90-day Bank Accepted Bill Futures: Similar to short-term government debt.
• 3-Year and 10-Year Bond Futures: Based on Australian government bonds.

The ASX also trades futures on things like grain, electricity, and wool.

Market indexes

The ASX works with Standard & Poor's to create stock indexes. These indexes help people see how different parts of the market are performing. The main ones are the S&P/ASX 20, S&P/ASX 50, S&P/ASX 100, S&P/ASX 200, and S&P/ASX 300. These generally include the 20, 50, 100, 200, and 300 largest companies listed on the exchange.

ASX Sharemarket Game

The ASX Sharemarket Game is a fun way for the public and students to learn about investing. Players get a pretend $50,000 to buy and sell shares using real market prices. They can track how their investments do over time, learning about the stock market without risking real money.

See also

In Spanish: Australian Securities Exchange para niños

• List of stock exchanges
• List of futures exchanges
• List of Australian exchange-traded funds
• All Ordinaries
• Odd lotter