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ASIAN EQUITY MARKETS AND TRADING

ASIAN EQUITY MARKETS AND TRADING. Chompunuch Bunsumpun. Quiz. What is the 1 st 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).

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ASIAN EQUITY MARKETS AND TRADING

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  1. ASIAN EQUITY MARKETS AND TRADING ChompunuchBunsumpun

  2. 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

  3. Tokyo Stock Exchange (TSE) Other Stock Exchanges in Japan Osaka Nagoya Fukuoka Sapporo JASNAQ Tokyo

  4. TSE – Brief History Reopened in May 16 Introduced first computer-assisted system First-founded in May 15 Restructured itself as a stock company 1878 1943 1949 1969 1982 1999 2001 NOW Combined with other exchanges to become single Japanese Stock Exchange Trading floors was closed; Switched to electronic trading for all transactions TOPIX was introduced Shut down due to the war (after the bombing of Nagasaki) In the 1880s In 1959 – Black Board with Chalk

  5. 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

  6. TSE – Market Structure • A continuous order-driven market • No specialist • No official market making activities • Intermediaries known as “Saitori”; order clerks • Market hours:

  7. 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 Placing orders via phones or Internet Securities Companies B (Non-trading Participant) Securities Company A (Trading Participant) Placing orders through TSE trading system as brokerage orders Tokyo Stock Exchange

  8. 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

  9. TSE Members - Classified into two Groups Regular Members Saitori • Trading clerks for customers accounts • Buy and sell for own accounts • Brokers among regular members • Maintain limit orders • Issue special quotes Unlike the U.S. Specialists, Saitoris do not trade for their own account

  10. 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

  11. 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) Tools for Market Volatility For example; Maximum ¥600 Base Price ¥500 Minimum ¥400 Base Price (The closing price of the previous day) Daily Price Limit ¥100 ¥100

  12. 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

  13. 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

  14. 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

  15. Q&A Thank you for listening

  16. 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

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