Transcript European and Asian Markets

By: Blayne Paulsen & Ryan Good
 Today, the FSE covers the complete process chain including securities
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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.
 The London Stock Exchange is one of the World’s largest stock
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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
 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
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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.
Name
Total Number of Total number of
Listed
Listed Foreign
Companies
Companies
Proportion
NYSE
2805
421
15%
NASDAQ
3200
335
10.5%
London Stock
Exchange
2800
430
15.4%
Singapore Stock
Exchange
728
268
36.8%
Tokyo Stock
Exchange
2416
25
1%
Hong Kong Stock
Exchange
1220
396
32.5%
Total
13169
1875
14.2%
 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?
 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?
 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?
 Hong
 Equity Market: HKEX
1842 Kong:
1997 A Product of What?
 16.5%
OpiumCorporate
Wars of mid
Tax 1800’s  Gov./Fixed/Commodities
 2008:
Frank $27K/
Lucas PC
Must
GDP
Be Jealous IPO Leader
MKT Cap of HSI 1986 - 2009
35000
30000
25000
20000
15000
10000
5000
0
Adj Close
 Democracy Vs. Communism
Float Disparity
 One Country, Two Systems
 Both Are Effectively Capitalist
 HK = 70% Mainland Trading
MKT Cap (HKD) of HKEx 2005 - 2009
MKT Cap of SSE 2005 - 2009
25,000,000,000,000
7000
6000
20,000,000,000,000
5000
15,000,000,000,000
4000
10,000,000,000,000
3000
2000
5,000,000,000,000
1000
0
1/3/2005
0
1/3/2006
1/3/2007
Total market capitalisation (HKD)
1/3/2008
1/3/2009
1/4/2005
1/4/2006
1/4/2007
Adj Close
1/4/2008
1/4/2009
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Hang Seng Index: 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
 Shenzhen Stock Exchange: SSE
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Created 1990
540 listed companies, Small to Medium
$1.7 Trillion USD
Traded in Hong Kong Dollars
 Shanghai Stock Exchange: SSE (yes… the same)
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Created in 1990
860 listed Companies, Medium to Large
$3.77 trillion USD
Traded in US Dollars
 Premiums on H Shares
 Supply/Demand Function
 No Arbitrage Channel
 What about hedge funds?
 Meanwhile in China…
 B Share Discount
 Why?
 Higher Liquidity
 Why…………?
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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
 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