A Comparative Study of Japan Exchange Group andAustralian Securities Exchange from 2011 to 2015
Sho YAMAUCHI: s2142054
January, 2017
List of Abbreviations and Acronyms
List of Abbreviations
APA......American Psychological Association
ASD......Australian Dollar
ASX......Australian Securities Exchange
ETF......Exchange Traded Fund
ETN......Exchange Traded note
ETP......Exchange Traded Product
FY......Financial Year
IPO......Initial Public Offering
JPX......Japan Exchange Group
JPY......Japanese Yen
NKY......Nikkei-225 Stock Average
OTC......Over-the-counter
USD......United States Dollar
WFE......World Federation of Exchanges
WWII......World War II
List of Acronyms
JASDAQ......Japan Securities Dealers Association automated Quotation
Table of Contents
1. Chapter 1: Introduction 3
1.1 Background and Introduction 3
1.1.1 Introduction 3
1.1.2 Background of JPX..............................................................................................3
1.1.3 Background of ASX............................................................................................3
1.1.4 Definition of terms...............................................................................................4
1.2 Research statement and Questions 4
1.3 Research Framework..................................................................................................4
1.4 Importance of Research..............................................................................................5
1.4.1 Interdisciplinary nature........................................................................................6
1.5 Methodology...............................................................................................................6
1.6 Literature Sources.......................................................................................................7
1.6.1 Primary sources 7
1.6.2 Secondary sources...............................................................................................7
1.6.3 Social commentary sources.................................................................................7
1.7 Ethical Considerations................................................................................................8
1.7.1 Plagiarism............................................................................................................8
1.7.2 Bias......................................................................................................................8
1.7.3 Reliability............................................................................................................8
1.7.4 Validity................................................................................................................9
2. Chapter 2: Organisational differences between JPX and ASX................................10
2.1 Organisational structure............................................................................................10
2.1.1 JPX....................................................................................................................10
2.1.2 ASX...................................................................................................................11
1. Chapter 1
1.1 Background and Introduction
1.1.1 Introduction Today, organisations called ‘stock exchanges’ or ‘securities exchanges’ have some important
roles, especially for businesses. WebFinance Inc. (2017a, ¶1) defines a stock exchange as an
organised and regulated financial market where securities such as shares and bonds “are
bought and sold at prices governed by the forces of demand and supply.” The roles of stock
exchanges include measuring the economic condition of a company but also of a country and
making it easy for businesses and investors to convert investments into cash. Desjardins
(2016, ¶1) explains there are 60 major stock exchanges in the world with a total value of
USD 69 trillion dollars. This report will compare two stock exchanges in the Asian Pacific
market: the Japan Exchange Group (JPX), ranked 4th in the world, and the Australian
Securities Exchange (ASX), ranked 15th. In order to do this, the researcher will use data of
Domestic Market Capitalization from April, 2015 and will specifically evaluate the data from
2011 to 2015 (Market Index, 2017).
1.1.2 Background of JPX In Japan, the first two stock exchanges were founded in Tokyo and Osaka in 1878 under
Stock Exchange Regulation. However, these two stock exchanges were forced to close during
World War II (WWII). After the end of WWII, in 1948, the Securities and Exchange Act was
implemented. Financial Services Agency (2017) describes that this law was amended and
renamed Financial Instruments and Exchange Act in June 2006. As a result, this established
an additional seven stock exchanges: Nagoya, Kyoto, Kobe, Hiroshima, Fukuoka, Niigata,
and Sapporo (Financial Services Agency, n.d.). In October 1967, the Kobe Stock Exchange
dissolved. The Tokyo Stock Exchange absorbed the Hiroshima and Niigata Stock Exchanges
in 2000 and the following year, the Osaka Stock Exchange absorbed the Kyoto Stock
Exchange. Eventually, JPX was formed in 2013 and includes Tokyo and Osaka stock
exchanges, as well as the remaining exchanges of Nagoya, Sapporo, and Fukuoka (Japan
Exchange Group, 2016a, p.5).
1.1.3 Background of ASX The history of the Australian Stock Exchange is older than the Japan Exchange Group.
Market Index (2017) explains the first Australian stock exchange was founded in Melbourne,
Australia in 1861. The second stock exchange was established in Sydney ten years later. After
that, four regional stock exchanges were established in Hobart in 1872, Brisbane in 1884,
Adelaide in 1887, and Perth in 1889. ASX Limited (2017a) states that the Australian Stock
Exchange was set up on 1 April 1987 by integrating these six stock exchanges. Finally, the
Australian Securities Exchange was formed in 2006 by merging with Sydney Futures
Exchange.
1.1.4 Definition of terms This research will compare two stock exchanges in terms of structure, liquidity, and
performance. Investopedia, LLC (2017a, ¶1) defines “liquidity as the degree to which an
asset or security can be quickly bought or sold in the market without affecting the asset's
price.” Also, financial performance indicates profit and market capitalisation. Investopedia,
LLC (2017b, ¶1) defines “market capitalization as the total dollar market value of a
company's outstanding shares.” Moreover, it is necessary for readers to know what a listed
company is. WebFinance Inc. (2017b, ¶1) defines a listed company as “a firm whose shares
are listed (quoted) on a stock exchange for public trading.”
1.2 Research statement and Questions This research will compare JPX with ASX, from 2011 to 2015, in order to identify how
structure, functions, liquidity, and performance created the gap between them even though
these exchanges were established within only 20 years of each other.
Question 1: What is the background of JPX and ASX?
Question 2: What are differences between JPX and ASX in the way each one organises its
market?
Question 3: What are the strengths and weaknesses of both stock exchanges?
Question 4: How can both stock exchanges be improved in the future?
1.3 Research Framework This interdisciplinary project consists of five chapters to answer four research questions and
present a conclusion.
Chapter 1 explores how JPX and ASX have been formed, by referring to primary sources,
which are made public in each website. Also, it introduces the ethical considerations which
will guide this research, which are plagiarism, bias, reliability, and validity as well as explain
the research method and sources used.
Chapter 2 will identify the ways each stock exchange has organized its market until now. In
order to do this, the researcher will refer to each of five annual reports from 2011 to 2015.
The aim is to focus on their organisational structure and functions because annual reports
mention not only sales and expenses records but also structure and functions. Also, the
sections shown on the home page of each stock exchange are very useful because it is
obvious what products are sold and what are the differences of regulations to become a listed
company.
Chapter 3 will find the strengths and weaknesses of both stock exchanges. It will take into
account the facts from Chapter 2 to answer Research Question 3 because the differences in
organisational structure and functions can be one of the factors affecting their weaknesses and
strengths. Also, it will consider the section of transaction levels and statistics in the annual
reports because it shows the records about listing businesses and the trend of cash. The
researcher will show some diagrams based on the information to make it easier for readers to
understand.
Chapter 4 will suggest how each stock exchange can take advantage of its strengths and how
each can overcome its weaknesses to improve in the future. In other words, this chapter will
draw on the ideas from previous chapters. The discussion will consider the influence of
politics, business, and finance. The researcher will collect this information from news,
business journals, and other trustworthy organisations.
Chapter 5 will give conclusions to the research questions. In other words, it will not present
any new ideas, but it will show the answer for research questions clearly. Also, it is easy for
readers who do not have enough time to read this whole report to generally understand what
it was discussing.
1.4 Importance of Research This research is different from other studies in the same field. First, it explains
comprehensively what a stock exchange is with definition and how it works. For this reason,
this research will give benefits to those who are not familiar with this financial industry
because such people can understand what this research discusses and expand their
knowledge. Also, this research will analyze two major stock exchanges in the world to
compare them. Therefore, those who research similar topics can get some tips.
1.4.1 Interdisciplinary natureThe project will be interdisciplinary by politics, business, and finance.
Politics
When people recognized the new president of the United States on November 9 th 2016, there
was a sharp decline from 17,171.38 on the preceding day to 16,251.54 on the day in the
indicator of stock prices for Nikkei 225 in accordance with the chart of Bloomberg L.P.
(2016). This research will therefore deal with the presidential election.
Business
It is essential for businesses to become a listed company in order to get a fund. Each
country’s stock exchange offers different tough requirements such as the amount of profit and
the number of shareholders, so investors can regard the businesses which met the
requirements as reliable and stable. Thus, the businesses can gain attention from investors for
trade. This research will therefore deal with the listing requirements.
Finance
This research is firstly involved with the discipline of finance as it deals with the financial
market.
1.5 Methodology The research will be carried out based on secondary research because referring to the
completed data and experts’ opinions is the most effective method to compare two things
especially for the performance of organizations in business. Also, the research will be
strongly connected with numbers because it gets easier for readers to see the gap of JPX and
ASX by showing tangible evidence. For this reason, quantitative sources should be helpful
for this research. To collect credible information, the sources can be from annual report,
libraries, business journals and other trustworthy organizations such as government and the
stock exchanges themselves.
1.6 Literature Sources
1.6.1 Primary sources University of Illinois (2006, p.1) defines primary sources as “those which provide first-hand
accounts of the events being researched. In general, these are documents that were created by
[those who witnessed or participated in] these events at about the time they occurred, and
include diaries, letters, reports, photographs, creative works, financial records, memos”, and
stock exchange pages. An example of a primary source used in this study is the website,
called Nikkei-225 Stock Average (NKY) quote – Nikkei 225 index – Bloomberg markets by
Bloomberg L.P. (2016). It is a very useful source because it has comprehensive information
including line graphs showing the volume of Nikkei 225 using selected time frames and the
best/worst ten performers and their names. In addition, the information is presented clearly
and it is much easier for the researcher to read the volume and percentage of return.
1.6.2 Secondary sources Virginia Polytechnic Institute and State University (2016, ¶3) defines secondary sources as
“those made by analyzing, reviewing, or summarizing based on the information of primary
resources or other secondary resources. Even sources presenting facts or descriptions about
events are secondary unless they are based on direct participation or observation. Moreover,
secondary sources often rely on other secondary sources and standard disciplinary methods to
reach results, and they provide the principle sources of analysis about primary sources.” An
example of secondary source is the website, called All of the world’s stock exchanges by size
by Desjardins (2016). The reason why this is a secondary source is that the author mentions is
based on the data from the World Federation of Exchanges monthly report from November
2015 at all. In other words, he gives his analysis to readers after referring to the trustworthy
primary source.
1.6.3 Social commentary sources World Public Library (2016, ¶1) defines “social commentary as the act of using rhetorical
means to provide commentary on issues in a society. This is often done with the idea of
implementing or promoting change by informing the general people about a given problem
and appealing to people's sense of justice. Social commentary can be practiced through all
forms of communication, from printed form, to conversations to computerized
communication.” An example of a social commentary source is the website, called Australian
stockmarket’s worst return since 2011 as ASX 200 gains 1.1pc. by Rogers (2015). The reason
why this is a social commentary source is The Weekend Australian is a news media, and
Rogers writes his article as a journalist. According to the article, the Australian share market
has turned in its worst annual performance in three years. Since this article was uploaded on
January 1 in 2015, it indicates the worst performance in 2014. 1.1 per cent is the smallest gain
since 2011, so there is a room for further discussion to analyze why the result was brought
about and whether it was solved by 2015.
1.7 Ethical Considerations
1.7.1 Plagiarism Robson (2014, p.137) defines plagiarism as “the passing off of someone else’s work as your
own.” This research will use quantitative data to compare each liquidity and performance,
and qualitative data to analyze each organisational structure and functions from mainly their
annual reports. Therefore, it is necessary for the research to respect their achievement. In
order to avoid plagiarizing, the researcher will use quotation marks if he will copy their
words without paraphrasing. Also, the researcher will identify where the sources come from
with APA (American Psychological Association) style.
1.7.2 Bias White (2017, ¶3) defines that “bias is a lack of objectivity or an inclination to favor one thing
or person over another.” This research is based on the annual reports from each stock
exchange, but this way can cause a bias. Therefore, it is important for this research to refer to
many sources because objectivity can be proved if these sources show same information.
1.7.3 Reliability Phelan & Wren (2005-6, ¶1) define reliability as “the degree to which an assessment tool
produces stable and consistent results.” In terms of trustworthiness, the annual reports should
be reliable because credible organizations have produced them. Moreover, if other credible
organizations show the same results, the fact testifies to the reliability of information.
1.7.4 Validity Robson (2014, p.56) defines that “validity refers to whether or not something actually
measures what it claims to measure.” In carrying out this research, it is sometimes hard to
interpret the data with terminology so it may cause a lack of validity. In order to prevent this,
the researcher will have meetings with one of his supervisors who is familiar with this topic
frequently and have him check to make sure this report discusses issues logically.
2. Chapter 2: Organisational differences between JPX and ASX The success of a stock exchange depends on its organisational structure and functions. This
chapter will focus on these aspects in order to analyze the differences between JPX and ASX
in the way each one organises its markets. The chapter is divided into three parts. The first
part of the chapter identifies how many markets each stock exchange has and analyzes their
purpose. The second part clarifies how each set of requirements for listing on the markets
works as one of the functions. The final part of the chapter explores the financial instruments
the investors of each stock exchange invest in. The researcher will do this by using the
relationship between each stock exchange and its listed companies as an example.
2.1 Organisational structure JPX and ASX differ in their organisational structures. This section discusses how many
markets each of these stock exchanges has and what kind of concepts the markets have, in
order to analyze the scale of markets before highlighting the differences between them.
2.1.1 JPX JPX has three markets for a company to be listed on. They are broadly classified into two
emerging markets: Market of the high-growth and emerging stocks (Mothers) and Japan
Securities Dealers Association automated Quotation (JASDAQ), and the Main Market which
is the largest and most established and consists of the Second Section and First Section. (see
Figure 1)
Source: Adapted from Japan Exchange Group, Inc., 2016b; ¶1
Figure 1: This figure shows JPX’s three markets which businesses can get listed on.
Kinds of Market JPX Has
Each of the three markets has a different concept. Japan Exchange Group, Inc. (2016b, ¶3)
explains that Mothers puts emphasis on the growth potential of businesses in terms of
eligibility requirements. Also, Japan Exchange Group, Inc. (2016b, ¶4) defines “JASDAQ as
a market characterized by the three concepts of reliability, innovativeness, and
regionalism and internationalism as its concept”, and consists of JASDAQ Standard and
JASDAQ Growth. JASDAQ Growth focuses on growth potential, whereas JASDAQ
Standard is all about stability. Moreover, Main Market focuses on corporate continuity and
profitability, but “the First Section is especially recognized as one of the top rank markets in
terms of its size and liquidity” (Japan Exchange Group, Inc., 2016b, ¶2).
2.1.2 ASX ASX has also three main markets for companies to be listed: ASX Listing, ASX Debt
Listing, and ASX Foreign Exempt Listing. (see Table 1)
Table 1: This table explains ASX has three categories for listing.
___________________________________________________________________________
___________________________________________________________________________Source: ASX Limited, 2016; p.101
ASX Listing is general and it is designed for companies domiciled in Australia. Also, ASX
Debt Listing is for a company which aim to only issue ‘bonds’. Investopedia, LLC (2017c)
defines bonds as “a debt investment in which an investor loans money to an entity (typically
corporate or governmental) which borrows the funds for a defined period of time at a variable
or fixed interest rate.” In addition, ASX Foreign Exempt Listing means that “an entity
admitted as an ASX Foreign Exempt Listing is required to comply with the rules of its
overseas home exchange and to release information to ASX that is released to its overseas
Kinds of Market ASX HasCategory of Listing Target
ASX Listing Ordinary Companies
ASX Debt Listing Companies which aim to only issue bonds
ASX Foreign Exempt Listing Companies listed on a foreign stock exchange*
*stock exchanges joining World Federation of Exchanges (WFE)
home exchange” (ASX Limited, 2016, p.101). In other words, ASX Foreign Exempt is
intended for a company whether Australian or international which is listed on a foreign stock
exchange joining WFE.
2.1.3 Comparison between organisational structure of JPX and ASX A comparison can now be made regarding of the organisational structures of JPX and ASX
by using the listed information in sections 2.1.1 and 2.1.2. JPX is more attractive for
businesses in terms of the number of markets. That is because they can choose from one of
these markets which fits their conditions if there are a variety of markets. JPX does not set
only a trustworthy market for investment like Main Market but also an apparently uncertain
market like emerging markets. Also, JPX sets a step by step approach to get listed on
emerging markets including Mothers and JASDAQ. That is because Mothers allow
businesses to become listed even if they have losses and bonds at initial public offering (IPO)
but pass other criteria while JASDAQ Growth allows businesses to be listed if they do not
have a deficit during a quarter before the application period. Therefore, JPX is very attractive
for domestic companies. However, ASX might be more attractive for some businesses to get
listed in rather than JPX. That is because JPX does not have a market involved with foreign
stock exchanges, but ASX has ASX Foreign Exempt Listing designed for companies listed on
a foreign stock exchange to be able to join WFE. For this reason, ASX supports domestic
companies who have expanded their business overseas.
2.2 Function: requirements for listing on the market This section examines each criterion a company has to meet to become listed on either JPX
or ASX, in order to clarify what each of these stock exchanges prioritizes.
2.2.1 JPX A company typically aims to become listed first on Mothers and/or JASDAQ, and then on
the Second Section and the First Section in turn (see Table 2). As discussed in 2.1.1, each of
the three markets has a different concept. Accordingly, each market sets a different level of
requirements for listing. First of all, Mothers requires a company to have more than 200
shareholders and 2,000 units of tradable shares. JASDAQ also requires a company to have
more than 200 shareholders, but a company does not need to have any tradable shares. In
addition, JASDAQ consists of JASDAQ Standard and JASDAQ Growth. The difference of
requirements for listing between these two markets is JASDAQ Standard requires a company
to have more than Japanese Yen (JPY) 200 million [United States Dollar (USD) 2 million],
but JASDAQ Growth permits listing of a company as long as it is not negative in terms of
shareholders’ equity. Then, the next market up is the main market, and the Second Section.
The Second Section sets easier admission criteria and tests to pass than the First Section. For
example, the admission criteria require a company to have more than 800 shareholders, 4,000
units of tradable shares, and JPY 2 billion (USD 20 million) of market capitalization as of the
listing day. On the other hand, the First Section presents the hardest 14 admission criteria and
a series of five tests to authorize a company to become listed (Japan Exchange Group, Inc.,
2012). For example, its admission criteria require a company to have more than 2,200
shareholders, 20,000 units of tradable shares, and JPY 25 billion (USD 250 million) of
market capitalization as of the listing day.
Table 2: This table explains what requirements for listing on each market in JPX presents.
___________________________________________________________________________
___________________________________________________________________________
Formal requirements
Source: Japan Exchange Group. Inc., 2015a; ¶1
2.2.2 ASX ASX has three markets for listing: ASX Listing, ASX Debt Listing, and ASX Foreign
Exempt Listing. However, all companies need to pass general requirements for listing on
ASX regardless of listing category (see Table 3). ASX Listing has three main listing
requirements to be met: there are meet 20 conditions, to pass either the profit test or the assets
test, and to submit an information memorandum. The 20 conditions include “having a
constitution which is consistent with the listing rules and be supported by at least 300 non-
affiliated security holders who holds a parcel of the main class of securities with a value of at
least Australian Dollar (ASD) 2,000” (ASX Limited, 2016, pp.102-103). Also, passing either
the profit test or assets test is one of the conditions. Specifically, the profit test is to examine
whether “the entity’s aggregated profit from continuing operations for the last three full
financial years [was] at least ASD 1 million, and the entity’s consolidated profit from
continuing operations for the 12 months to a date no more than two months before the date
the entity applied for admission must exceed ASD 500,000” (ASX Limited, 2016, p.106).
Moreover, assets test is to examine whether “an entity that is not an investment entity must
have ASD 4 million net tangible assets or ASD 15 million market capitalisation at the time of
admission” (ASX Limited, 2016, p.106). ASX Debt Listing also presents 12 conditions but it
does not require to take any tests because originally ASX Debt Listing is designed for the
businesses which get only authority to issue bond. Finally, ASX Foreign Exempt Listing
presents 12 conditions as well but it requires to pass either the profit test or assets test.
Concretely, the entity’s operating profit before income tax for each of the last 3 full financial
years must have been at least ASD 200 million, or an entity must have net tangible assets of
at least ASD 2,000 million or a market capitalisation of at least ASD 2,000 million (ASX
Limited, 2016, p.116).
Table 3: This table describes the general requirements to get listed on ASX.__________________________________________________________________________________
General requirements for listing on ASXAdmission Criteria General RequirementsNumber of Shareholders Minimum 300 non-affiliated investors @ A$2,000Free Float 20%
Company SizeProfit Test
A$1 million aggregated profit from continuing operations over past 3 years + A$500,000 consolidated profit from continuing operations over the last 12 months
Assets TestA$4 million net tangible assetsor A$15 million market capitalisation
___________________________________________________________________________Source: ASX Limited, 2017b; ¶1
2.2.3 Comparison between requirements of JPX and ASX A comparison can now be made regarding of the listing requirements of JPX and ASX by
using the listed information in sections 2.2.1 and 2.2.2. In comparing JPX with ASX, there
are two main points to consider in regards to the requirements of listing, which is one of the
functions. Firstly, the minimum number of shareholders which JPX requires is less than the
number ASX requires. Both stock exchanges have three main markets. However, each market
in JPX requires a different number of shareholders, which ranges from at least 200 to more
than 2,000, while all markets in ASX requires a company to have at least 300 shareholders.
Secondly, the minimum number of years of business operation which JPX requires is less
than the number ASX requires as well. Both stock exchanges require a company to operate
some years at the time of admission. For instance, JPX has both a market requiring more than
3 years of business operation and a market requiring more than 1 year of business operation.
On the other hand, all the markets in ASX require more than 3 years of business operation.
Therefore, it is better for both small and medium-sized companies, and large companies, to be
listed on JPX because JPX has a wider range of listing.
2.3 Financial instruments This section examines each set of financial instruments for an investor to buy and sell, in
order to explore how each stock exchange operates and gets profit. WebFinance, Inc (2017c)
defined financial instruments as “a document that has a monetary value or represents a legally
enforceable agreement between two or more parties regarding a right to payment of money.”
In fact, listing can be one of the financial instruments for a stock exchange. As discussed in
the previous sections, a company typically aims to become listed and a stock exchange sets
requirements of listing on the market. Basically, the reason why a company aims to get listed
is to collect funds for its operation from investors by selling their shares as a financial
instrument. However, it is uneasy for investors to invest in companies which have potential
for bankruptcy due to financial difficulty because their shares can lose all value. For this
reason, stock exchanges such as JPX and ASX set a reliable market like main market for
Japan and ASX Listing for Australia consisting of listed companies recognised enough for
their corporate continuity and profitability. Therefore, stock exchanges and companies can
regard listing as a viable financial instrument.
2.3.1 JPX Shares are an important financial instrument. In fact, JPX has 20 kinds of products in total.
13 out of 20 products are categorised as equities and remaining 7 products are derivatives
(see Table 4).
Table 4: This table shows all the financial instruments which JPX has.
___________________________________________________________________________
All the financial instruments which JPX hasEquities domestic stocks, foreign stocks, Exchange Traded Fund (ETFs), Exchange
Traded Note (ETNs), Real Estate Investment Trust (REITs), venture funds,
country funds, infrastructure funds, preferred stocks, etc., Japanese
government bonds, convertible bonds, subscription warrant securities, and
preferred equity investment securities
Derivative
s
Japanese indices, overseas indices, dividends indices, volatility indices,
REIT indices, bond, and individual security
___________________________________________________________________________Sources: Japan Exchange Group, 2017a; p.1 and 2017b; p.1
Compared to ASX, JPX has three characteristic financial instruments. The first different
instrument is venture funds. They are intended for investment corporations which regard
privately held companies as investment outlet. The second instrument is country funds. They
are dealt with by investors in order to invest in a particular country or area. The third
instrument is infrastructure funds. They focus on infrastructure such as solar facility and
harbor facility for investment. All of these instruments in Table 4 contribute to the trading
services revenue. Total operating revenue is 46% which means JPY 48.6 billion (see Figure
2). Also, cash equities occupy 71.4% of total trading services revenue while derivatives
occupy 28.6% of that in details (see Table 5).
Composition of Operating Revenue in FY 2014
Source: Adapted from Japan Exchange Group, Inc., 2015b; p.7
Figure 2. This doughnut chart illustrates JPX’s operating revenue in financial year (FY) 2014
is composed of five categories both in percentage and in billions of yen.
Table 5: This table explains a breakdown of trading services revenue in financial year 2014.
___________________________________________________________________________
A breakdown of trading services revenue in financial year 2014Subject Amount (Millions of yen) Ratio (%)
Trading Services Revenue 48,698(1)+(2)+(3)+(4)+(5)+(6) -
Transaction Fees 40,221(1)+(2) -
Cash Equities 28,705(1) 71.4%
Derivatives 11,515(2) 28.6%
Basic Fees 1,067(3) -
Access Fees 4,730(4) -
Facilities Usage Fees 2,600(5) -
Others 79(6) -
___________________________________________________________________________Source: Japan Exchange Group, Inc., 2015b; p.66
2.3.2 ASX Compared to JPX, ASX has two characteristic financial instruments (see Table 6). The first
different instrument is hybrid securities. ASX Limited (2017c, ¶1) explains “Hybrid securities
typically promise to pay a rate of return (fixed or floating) until a certain date, in the same
way debt securities do. However, they also have equity-like features that can mean they may
provide a higher rate of return than regular debt securities.” The second instrument is grains
derivatives. Australian Trade and Investment Commission (2017, ¶1) states “Australia is the
Composition of Operating Revenue in FY 2014
sixth largest country by total area and also known as an agricultural country because 60
percent of national land is used for agriculture and 60 percent of production is exported to
other countries.” From this background, ASX has grains derivatives which other stock
exchanges do not have.
Table 6: This table shows all the financial instruments which ASX has.
___________________________________________________________________________
All the financial instruments which ASX hasCash market shares, indices, bonds, hybrid securities, ETFs and other
Exchange Traded Product (ETPs), managed funds, and warrants
Derivatives and
over-the-counter
(OTC)
options, index derivatives, interest rate derivatives, grains
derivatives, and energy derivatives
___________________________________________________________________________Source: ASX Limited, 2017d; p.1
Cash market in Table 6 contributes to 5% of total operating revenues while derivatives and
OTC market contributes to 32% of them (see Figure 3).
24%
5%
7%
6%32%
10%
8%
6% 2%Operating revenues mix
Listings and Issuer ServicesCash Market TradingCash Market ClearingCash Market SettlementDerivatives and OTC MarketsInformation ServicesTechnical ServicesAustraclearOther revenue
ASD 658.3 mil-lion
Source: Adapted from ASX Limited, 2014; p.1
Figure 3. This doughnut chart illustrates ASX’s composition of operating revenue in financial
year 2014.
2.3.3 Comparison between the financial instruments of JPX and ASX A comparison can now be made regarding of the financial instruments of JPX and ASX by
using the listed information in sections 2.3.1 and 2.3.2. JPX puts emphasis on funds while
ASX puts emphasis on derivatives. In comparing JPX with ASX, JPX has three characteristic
financial instruments: venture funds, country funds, and infrastructure funds. On the other
hand, ASX takes advantage of its competitive agriculture with other countries and
subsequently it has grains derivatives. In terms of operating revenues, it is obvious that JPX
focuses on equity, whereas ASX focuses on derivatives as Figures 2 and 3 show. That is, the
proportion of JPX’s operating revenue is 71.4% for cash equities and 28.6 % derivatives, but
the proportion of ASX’s operating revenue is 5% for cash market trading, and 32% for
derivatives and OTC market. However, surprisingly, investors deal with JPX’s derivatives
more than ASX’s derivatives (see Figure 4).
Source: Adapted from Japan Exchange Group, Inc., 2015b; p.13
Figure 4. This clustered bar illustrates how many billions of contracts stock exchanges have
carried out in terms of derivatives.
2.4 Chapter summary This chapter consisted of three parts: organisational structure in 2.1, requirements for listing
as a function in 2.2, and financial instruments in 2.3. The first part identified both JPX and
ASX have three markets and analyzed each focus on domestic and foreign aspects. The
second part clarified the level of JPX’s listing requirements is more extensive range than
ASX’s listing requirements. The final part explored JPX focuses on equity while ASX
focuses on derivatives, but the volume of contracts for derivatives in JPX is more than
ASX’s.
Derivatives Volume Rankings
References
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