By Daniel Archibald | CFA
Up until 2006, the acronym ASX stood for Australian Stock Exchange. After a merger between the country's stock and futures exchanges, the 'S' in ASX become 'Securities' (i.e. Australian Securities Exchange). Today, roughly 3 million shares and other securities are traded on the market on a daily basis.
Most of these are the usual stocks that are familiar to investors the country over: The blue chips stocks such as BHP and the banks; or Australian success stories such as CSL and Afterpay. Altogether, there are over 2000 companies listed on the ASX, with about $10 billion worth of shares traded every day.
Other than shares (company equity), there are number of other types of securities listed on the ASX by issuers (companies or government). These are:
- Debt securities - Government bonds, corporate bonds and hybrid securities can all be listed on the ASX by issuers and traded between investors. This market is much smaller than the traditional bond market (which is generally only accessible to institutional/wholesale investors).
- Derivatives - Investors can also trade 1000s of warrants, options, futures and swaps on the ASX. These may have individual shares as the underlying exposure (such as for warrants and options), or may be based on broader indices (such as for futures and swaps)
- Listed investment companies or trusts (LICs/LITs) - Investment managers can also issue shares or units to investors into managed vehicles that can trade on the ASX. This can include equity manager LICs, property trusts (REITs), infrastructure trusts, absolute return funds and pooled development funds. These types of funds are useful for managers of illiquid assets as the ASX market helps provide an avenue for purchase and sale of issued shares/units.
Other than the LICs, investment managers can also choose to utilise the ASX platform as a tool to quote and trade units in managed funds (exchange traded products - ETPs) or to simply have the ASX settle transactions in unlisted funds (mFunds):
- ETPs - The main type of ETP are index-tracking exchange traded funds (ETFs). These are passively managed and look to track the return of key indices (such as the S&P500) or exposures (such as gold). Newer ETFs might also be actively managed, whereby investors participate in the investment expertise of the underlying manager. These are similar to LICs, however, they are more likely to trade close to the underlying value of the managers portfolio. Other ETPs include exchange-traded managed funds (ETMFs), which are primarily used by bond fund managers, and structured products, which are generally used by commodity fund managers
- mFunds - These funds are not listed or quoted on the ASX, but are a separate platform for investors to access unlisted managed funds. This is similar to other managed fund platforms such as wrap accounts or master trusts, and allows investors to house both listed/traded holdings together with their unlisted holdings.
Australia's largest exchange offers investors access to a range of listed, traded and settled exposures. Ongoing product innovation means that Australian investors are able to gain greater exposures to global markets and a full range of exposures through the ASX. This should continue to help investors to diversify portfolios, reduce transaction costs and simplify their investment management.