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What is the Australian Stock Exchange?

By Donn Saylor
Updated May 17, 2024
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The Australian Stock Exchange is Australia's system for trading stocks, bonds, and other securities on the country's financial market. The Australian Stock Exchange is officially called the Australian Securities Exchange (ASX). The Australian Stock Exchange operates as a full-service exchange, functioning as a market operator, payment facilitator, and clearing house. It contains no traditional trading floor system.

Prior to 1987, each of Australia's six capital cities operated individual stock exchanges in their respective territories. The Australian Stock Exchange was formed when all six locations were combined into a single unit. Also in 1987, an entirely electronic system of trading was implemented, and the physical trading floor was eliminated a few years later. In 2006, the Australian Stock Exchange merged with the Sydney Futures Exchange, and, in 2010, merged with the Singapore Exchange. The Exchange is headquartered in Sydney, Australia.

Investors have two options when it comes to shareholding. One is issuer-sponsored, meaning that a business's share register manages the investor's holding and assigns the investor a reference number, which is used when trading. The other option is the Clearing House Electronic Subregister System (CHESS). CHESS is a book-entry register of holdings in electronic form. It contains approved securities and administers transactions between the Australian Stock Exchange and CHESS members. Clients who wish to utilize CHESS must be sponsored into the system by a broker.

The Australian Stock Exchange produces the All-Ordinaries Stock Index, a register of common shares from the Exchange. This index is considered the standard record of all Australian stocks. The Exchange is solely accountable for the proper calculation and circulation of the Index.

Interest rates on stocks traded in the Australian Stock Exchange are determined by the Australian Financial Markets Association Bank-Bill Reference Rate. The Australian Financial Markets Association (AFMA) publishes the wholesale internal bank rate within the country. This rate is used as a reference when determining how much interest investors will be charged on trades.

The Australian Stock Exchange has two trading sessions per day. A pre-opening phase begins the day, and during this session, brokers prepare and enter orders for the scheduled opening of the day. The Exchange does not actively trade during pre-opening, but investors may enter trades online. When the market officially opens after pre-opening, the trades are pulled out of a queue in the order in which they were received and entered into trading. After the Exchange officially opens, trading begins and continues throughout the day.

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