All About Australian Stock Exchanges

With Australia following the deregulatory trends of recent decades, the nation of 26 million has grown into a perhaps unexpected leader in global finance. Much like the US’ NYSE and the UK's London Stock Exchange, buying stocks, bonds, and securities on Australian securities exchanges is a breeze.

While there's considerable correlation between Australian and US markets, this small country’s securities markets do sometimes go their own way outside of crisis situations. A substantial resources industry has put the ASX on global footing for mining firms like BHP (ASX: BHP) and Fortescue (ASX: FMG) among others.

Here’s what to know about the Australian securities markets. 

Australian Stock Exchanges

If you're buying or selling financial assets in Australia, there are technically three noteworthy exchanges; however, the ASX dominates in interest, market cap, and trading volume,, as it makes up the bulk of Australian financial markets securities flows. 

  • Australian Securities Exchange (ASX): 10 AM - 4 PM Australian Eastern Time
  • National Stock Exchange of Australia (NSX): 10 AM - 4:15 PM Australian Eastern Time
  • The Sydney Stock Exchange (SSX): 10:15 AM - 4:15 PM Australian Eastern Time

Perhaps the largest difference between Australian stock exchanges and their overseas counterparts is the extent to which a single exchange accounts for nearly the entire market. The U.S., Canada, and the UK have numerous exchanges of considerable size – think NYSE, NASDAQ – whereas Australia has few exchanges of appreciable size. One is undergoing major structural changes as of November 2021, another has 75 listings, and the other has 2,194 listings with an impressive market cap of 2.5 trillion Australian dollars ($1.8 trillion USD).

Australian Securities Exchange

The origins of the Australian Securities Exchange reach back to when Australia established a series of stock exchanges in each state capital in the second half of the 19th century. In 1861, the Melbourne Stock Exchange came first thanks to the gold rush that kickstarted the city's growth. Stock exchanges in Brisbane, Sydney,  Adelaide, Perth, and a Hobart-Launceston exchange soon followed.

From the beginning of the 20th century, these markets drifted toward greater standardization and centralization until the formation of the Australian Associated Stock Exchanges (AASE) in 1937. This was the first point in Australian history where a set of unified rules and commission rates were standardized throughout Australia. In 1987, the Australian parliament allowed the six major exchanges to unify into the Australian Securities Exchange (ASX).

The Australian financial markets have remained remarkably innovative since, competitive on a global scale. For instance, ASX was the first stock exchange in the world to list its own shares, a move which many other exchanges have since imitated, including the Hong Kong Exchanges and Clearing Limited (HKEX: 388) and Nasdaq (Nasdaq: NDAQ) among others.

The Australian Securities Exchange stands as the fifth largest in the world and can claim many laurels, such as:

  • Ranked 5th in financial systems and capital markets by the World Economic Forum 
  • 8th largest equities market in the world 
  • 3rd largest debt market in the Asia-Pacific region
  • AUD is 5th most traded currency in the world
  • Largest fixed-income derivatives in the Asia Pacific region
  • 4th largest pool of pension assets

The ASX maintains diversity of listings , too, with around 2,000 Australian companies and more than 250 foreign companies listed. The exchange supports two principle markets, a cash market and a derivative market that each provide opportunities for portfolio diversification.  

The ASX is particularly well-known outside of the region for its precious metals and natural resources listings. 

The primary index that tracks ASX securities, similar to the S&P 500 in the U.S., is the S&P/ASX 200 (XJO), the leading share market index containing the top 200 ASX listed companies by market capitalization. The SPDR S&P/ASX 200 Fund (STW) and Ishares Core S&P/ASX 200 ETF (IOZ) are the two most popular ETFs tracking the ASX 200.

Equities Market

The ASX Equities market is the go-to choice for standard Australian financial products, such as:

  • Individual Shares 
  • Indices
  • Exchange Traded Funds (ETFs) and other Exchange Traded Poducts
  • Government and corporate bonds
  • Hybrids
  • Warrants
  • Real estate investment trusts (REITs)

These and more investment options provide invaluable opportunities for prospective investors, with convenient, practical ways to gain exposure across all of the Australian regions and sectors. 

Derivatives Market

ASX has a robust derivatives market that offers investors access to Australia and New Zealand's markets via:

  • Grain derivatives
  • Energy derivatives 
  • Interest rates
  • Equity derivatives

Short Selling

Short selling is limited on the ASX, and not every security can be sold short. The Australian Securities and Investments Commission put new rules in place in 2008, and updated them in 2018, to curb short selling in ASX securities. Since 2010, all stockbrokers are required to report their total short sale positions daily. This information is released four days (T+4) after the trade on ASIC’s website.

Short-selling in Australia is onerous in reporting obligations, making it more challenging than some other markets, but it can be done.

Other Australian Stock Exchanges

While the Australian Securities Exchange is roughly ten times larger than all other Australian stock exchanges combined, there are some other noteworthy exchanges. For instance, the National Stock Exchange of Australia was once a major player and is currently the largest of Australia's small exchanges. Another institution, the Sydney Stock Exchange, is striving to become a credible figure in the industry as well. 

National Stock Exchange of Australia 

In 1937, the Newcastle Stock Exchange opened ,only to close its doors for years due to the outbreak of World War Two. After reopening in 1947, it enjoyed decades of fruitful operations and at one point listed more than 300 companies. An inactive phase from 1985 to 2000 saw the exchange start over from scratch with a new name, the National Stock Exchange of Australia. With some 70 listings, it's Australia's second-largest stock exchange. 

The Sydney Stock Exchange

SSX has operated since 2004 and first went under the name Asia Pacific Exchange, which denotes its major traditional role of listing Chinese companies seeking overseas capital. The exchange has always struggled to gain credibility within its home nation, and rebranding as the Sydney Stock Exchange did little to change things.

However, the exchange is putting in effort to reject companies it doesn't believe in and improve its image. This new strategy combined with more modest fees and a lower cost of entry compared to the Australian Securities Exchange, has made 2021 a good year for SSX, although it's still a bit player in the world of Australian finance. 

Who Regulates Australian Exchanges?

The Australian Securities and Investments Commission (ASIC) is similar to the U.S.’ SEC, responsible for the supervision of trading on Australia’s domestic markets, including those operated by the ASX Group, and for enforcing the laws against misconduct on Australia’s financial markets. They also supervise holders of the Australian Financial Service Licence (AFSL), similar to requirements of brokers and investment advisors in the U.S.

The Reserve Bank of Australia has responsibility in licensing, clearing, and settlement facilities too.

In 2020, the ASX and Nasdaq made headlines for a rare market outage. ASX was refreshing its trading system on November 16 and deploying a Nasdaq technology used globally when, despite over a year of testing, it failed. The stock exchange opened for less than 30 minutes before being forced to close for the remainder of the day, resulting in an extensive review by regulators and an assessment in August 2021 that the new system “was not ready to go-live considering ASX's near zero appetite for service disruption” according to IBM.

How to Trade on ASX

In terms of backend technology, ASX uses two proprietary digital trading platforms, ASX Trade and ASX Trade 24. The former is an ultra-low latency system for trading equities within the Australian market in as little as 250 microseconds of latency. ASX Trade 24, on the other hand, is a global trading platform for derivatives that supports efficient trading with a 24-hour trading system that maintains two separate trading days simultaneously. 

StockBrokers.com ranks customer-facing brokerage platforms from first through fifth in the country as: 

  1. CMC Markets
  2. IG
  3. CommSec
  4. Interactive Brokers
  5. Westpac

Investing and Borrowing on Australian Stock Exchanges

The ASX remains a competitive bourse globally, and its smaller counterparts in the country the SSX and NSX are striving to make a name for SME (small and medium-sized enterprises) listings not ready for the ASX.

Despite some hurdles to short-selling in Australian markets, borrowing against your own ASX-listed shares as collateral isn’t challenging, particularly with our experienced team. We can lend against most Australian stocks to help you get liquidity in and outside of Australia, no matter the exchange, with fast closings and an easy process. We work with large position holders, executives, and anyone who needs liquidity but isn’t ready to sell. We can deliver payment in all jurisdictions, and we can even help Australians borrow against cryptocurrencies too, with most liquid coins acceptable. 

Click here to get in touch and find out if borrowing against a position is the right fit for you.