asian equity markets and trading

ASIAN EQUITY MARKETS AND TRADINGC h o m p u n u c h B u n s u m p u n

Quiz What is the 1st largest stock market

in Asia by market capitalization? A. Bombay Stock Exchange B. Shanghai Stock Exchange C. Tokyo Stock Exchange D. Hong Kong Stock Exchange

Tokyo Stock Exchange (TSE)

Tokyo

Other Stock Exchanges in Japan Osaka Nagoya Fukuoka Sapporo JASNAQ

TSE – Brief History

1878

First-founded in May 15

19491943Combined with other exchanges to become single Japanese Stock ExchangeShut down

due to the war (after the bombing of Nagasaki)

1969

Reopened in May 16

TOPIX was introduced

1982

Introduced first computer-assisted system

Trading floors was closed; Switched to electronic trading for all transactions

20011999

Restructured itself as a stock company

In the 1880s

In 1959 – Black Board with

Chalk

NOW

TSE – Current Snapshot Largest of the 6 exchanges in Japan Over US$4 billion market cap Over 2,300 companies listed (both domestic

and foreign) TSE market segmentation:

Two main benchmark indexes – Nikkei 225 and the TOPIX

First Section

Second Section

“Mothers” Section

TSE – Market Structure A continuous order-driven market No specialist

No official market making activities Intermediaries known as “Saitori”; order

clerks Market hours:

Who can trade on the TSE market? Only TSE

member (“Trading Participant”) can trade securities directly in the market.

Individual investors

Foreigners

Customer A Customer B

Securities Company A (Trading Participant)

Tokyo Stock Exchange

Securities Companies B (Non-trading Participant)

Placing orders via phones or Internet

Placing orders through TSE trading system as brokerage

orders

TSE Membership Membership requires corporate license Four types of license are available and

may be combined

Capital requirements vary by license

Trade securities as a dealer Trade as a broker

Underwrite new securities

Handle retail distribution of

securities

TSE Members - Classified into two Groups

Trading clerks for customers accounts

Buy and sell for own accounts

Brokers among regular members

Maintain limit orders

Issue special quotes

Regular Members Saitori

Unlike the U.S. Specialists, Saitoris do not trade for their own account

How does trading work on TSE?

Order type: Market Order & Limit Order

During normal trading session, order priority is determined based on Price Priority Time Priority

Only day order Trading Unit: Mostly

1000 shares

How does trading work on TSE?

“Itayose” Method – Opening, Closing, After trading halts

“Zaraba” Method – Regular trading session Daily Price Limit

Special Quote Latest IT: Arrowhead Settlement: T+3 basis by Japan Securities

Depository Center (JASDEC)

Base Price(The closing price of the

previous day)

Daily Price Limit

For example;Maximum ¥600Base Price ¥500Minimum ¥400

¥100¥100

Tool

s for

Mar

ket

Vola

tility

Market Outlook Global exchange consolidation trend

The rational for exchange mergers are typically driven by‒ Additional access & cost savings‒ Improve liquidity and efficiency

Trading links trend – ASEAN With increased competition, TSE may force to

seek alliances

Final Thought – Major Comparison to NYSE

Order-driven market No specialist Members only Have break Price daily limit &

Special quote

Hybrid market With specialists Members only No break Circuit breaker

Final Quiz What is the major

difference between NYSE Specialist and TSE Saitori?

A. Broker among members B. Do not trade for

their own accounts

Thank you for listening

Q&A

Sources

Wikipedia Investopedia Tokyo Stock Exchange Website World Federation of Exchanges

Website ASEAN Exchange Website J.P. Morgan Research Video Link: http://

www.youtube.com/user/radioerrols#p/u/23/92FQA6loopY