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Euro/Asian Exchange Markets

Euro/Asian Exchange Markets. By: Blayne Paulsen & Ryan Good. Frankfurt Stock Exchange (FSE).

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Euro/Asian Exchange Markets

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  1. Euro/Asian Exchange Markets By: Blayne Paulsen & Ryan Good

  2. Frankfurt Stock Exchange (FSE) • Today, the FSE covers the complete process chain including securities and derivatives trading and clearing, transaction settlement, custody, the provision of market information, and development and operation of electronic trading systems. • Known as one of the oldest exchanges in the world. It dates back to an official exchange list, which provided 12 different currencies in 1625. • It is the largest of 8 banks in Germany. • The success of this exchange hasn’t been primarily due to the structuring of the company, but it was one of the first exchanges to go electronic. It began processing some of its data electronically in 1969. • In 1997 the FSE launched Xetra, a fully electronic system. Which has made the exchange floor obsolete. • Eurex: Market leader in trading and settlement of futures/options on shares, indices, ETFs and money market products.

  3. London Stock Exchange (LSE) • The London Stock Exchange is one of the World’s largest stock exchanges. It deals in over 2800 domestic listed and 460 international companies. • Its heritage dates back to 1698 when stock dealers were expelled from the royal exchange for “rowdiness.” They began selling and trading in the streets and coffee shops. • 1801 marked the date the first regulated exchange came to existence in London. (Now known as the LSE) • “Big Bang” • In 1997, the exchange made the move to an electronic system called SETS (Stock Exchange Electronic Trading Service). Created more efficiency to the exchange. • Extranex

  4. New York Stock Exchange (NYSE) • Established in 1792 with the Buttonwood Tree Agreement. • Railroad companies dominated the exchange through the 1800’s. • The NYSE’s first centralized location was a room rented for $200 a month at 40 Wall Street in 1817 (Burnt down in the Great Fire of New York). • Bruno Des Forges becomes first non-US member on Exchange in 1976. • 1977 NYSE allows foreign brokers/dealers membership on the floor. • 1979 modernization of trading floor. • 1997 wireless data system inaugurated on trading floor, allowing brokers to receive orders, access market information and transmit execution reports from any location on the trading floor. • Today the NYSE is a major player in international trade, the capital market flow is generated from over 2805 domestic listed and 421 international companies.

  5. London Stock Exchange: “Big Bang” • Ownership of member firms by an outside corporation is allowed. • Abolition of the distinction between stockjobbers and stockbrokers. • Move from an open-outcry system to an electronic, screen based trading system. • Deregulation of financial markets. • Why all of the regulation change? • Did new system improve the exchange?

  6. Ownership • Each of these exchanges are publically traded. • FSE owned by Deutche Boerse Group • LSE owned by London Stock Exchange Group • Exchange competition- Mergers • NYSE & Euronext • China • Why merge with Europe?

  7. International Exchanges • There are international exchanges located around the world. • http://www.bloomberg.com/markets/stocks/wei_region2.html Why is there not an international exchange in Africa? Is this due to development? Does it effect their economy?

  8. Demystifying China's Equity Markets

  9. Best Thing To Ever Come of Drug Abuse • Hong Kong: A Product of What? • Opium Wars of mid 1800’s • Frank Lucas Must Be Jealous • 1842  1997 • 16.5% Corporate Tax • 2008: $27K/ PC GDP • Equity Market: HKEX • Gov./Fixed/Commodities • IPO Leader

  10. Hong Kong vs. Mainland (PRC) • Democracy Vs. Communism • One Country, Two Systems • Both Are Effectively Capitalist • HK = 70% Mainland Trading Float Disparity

  11. Hong Kong Stock Exchange (HKEX) • Hang SengIndex: NOT a Stock Exchange • HKEX formed in 1891 • Similar to NYSE/SuperDot • Ease of Listing • Leader (top 5) in IPOs • “H” Shares & Red Chips • 1285 Companies (PRC + HK) • $ 11.57 Trillion HKD • ($ 1.5 Trillion USD) • June 1 2001 Restrictions Lifted: • Now: • Prior: Spot exchange deposits and foreign currency cash deposits

  12. Mainland Stock Exchanges • Shenzhen Stock Exchange: SSE • Created 1990 • 540 listed companies, Small to Medium • $1.7 Trillion USD • Traded in Hong Kong Dollars • Shanghai Stock Exchange: SSE (yes… the same) • Created in 1990 • 860 listed Companies, Medium to Large • $3.77 trillion USD • Traded in US Dollars

  13. Share Structure Simplified

  14. Price Disparities for Dual-Listed Shares • Premiums on H Shares • Supply/Demand Function • No Arbitrage Channel • What about hedge funds? • Meanwhile in China… • B Share Discount • Why? • Higher Liquidity • Why…………?

  15. Beyhond a New Frontier: Shanghai and Shenzhen • Transfer of Power to Mainland • WTO Impact • China’s Growing Wealth (>$2 Trillion USD) • Translation of Growth to Equity Markets • A/B Shares • Auction timing • Premiums for Intl. Investors • Loyalist Party Benefits • H Shares/Red Chips • Dual Listings • China’s Control on the Markets • What’s the Big Deal? • SEC vs. SFC Vs. CSRC

  16. Questions? • Blayne Paulsen • Frankfurt Stock Exchange • London Stock Exchange • New York Stock Exchange • Comparisons • Ryan Good • Hong Kong Stock Exchange • Shanghai Stock Exchange • Shenzhen Stock Exchange • Share Relationships

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