The sharemarket (also known as the stockmarket) is where shares and other securities including Exchange Traded Funds (ETFs), warrants and options are bought and sold.
Australia has three exchanges where securities can be traded:
- Australian Securities Exchange (ASX)
- Chi-X Australia (Chi-X)
- National Stock Exchange of Australia (NSX)
To be able to trade on these exchanges your broker needs to be a participant of the relevant exchange. OpenMarkets is a participant of each Australian exchange.
Unlike the old days there is no longer a physical sharemarket with traders yelling orders - all transactions today are conducted electronically.
Each of Australia’s exchanges operate a:
- Primary market – where companies raise money by issuing shares through an IPO, sometimes referred to as a ‘float’. An IPO – or initial public offering – allows a company to raise capital from investors to support its future growth. The company is required to issue a prospectus; investors complete an application form to apply for an allocation of shares.
- Secondary market – where investors and traders buy and sell shares at prices determined by company and industry specific factors, as well as market forces.
A change in the sharemarket’s direction is indicated by the movement of an index that represents key companies listed on that sharemarket. In Australia, the All Ordinaries Index or ASX200 is generally used to track broad sharemarket movement.
For easy identification, each stock listed on an Australian exchange is allocated a three-letter code. For example, Commonwealth Bank’s code is CBA, the A2 Milk Company is A2M and Wesfarmers is WES.
Other securities also have codes, albeit a little longer. Where a security is related to a specific stock, it will include that company’s code. For example, while ANZ is the stock code of the bank, its warrants have codes such as ANZIWJ and ANZSSY. Each code relates to specific securities, each with its own specific features.
For more information on investing in shares and the sharemarket, we recommend visiting asx.com.au