Stocks

STOCKS -THE STOCK EXCHANGES

What is the stock exchange? The stock exchange is the market in which securities are issued and traded or better it’s the place where demand and supply meet. It reflects the world economy.

You may discover how to be rich after few years studying the stock exchanges. The concept of stop loss order is valid too. But you have to take care of domestic issues. (debt ceiling)

There are a lot of stock exchanges in the world: Africa has 23 stock exchanges, Asia 108, Europe 76, North America 45, South America 26, Oceania 8. Stock exchanges differentiate for the way exchanges happen (auction exchanges, electronic exchanges and Over-the-counter exchanges), for the kind  of goods traded, for the requirements in quoting securities, for capitalization and for trading volumes.

In our days the biggest stock exchanges of the world are respectively the following: the New York Stock Exchange, the NASDAQ, the Tokyo Stock Exchange, the London Stock Exchange Group, the Euronext, the Hong Kong Stock Exchange, the Shanghai Stock Exchange.

THE NEW YORK STOCK EXCHANGE (NYSE): it was founded in 1792 in the city of New York. In 1817 the company was named “New York Stock & Exchange Board” and in 1863 it changed the name into “New York Stock Exchange”. In 2005 it merged with Archipelago (the exchange market for both stocks and options) and it became a for-profit public company. In 2006 it changed the name into NYSE Group. In 2007, the NYSE Group finished to merger with Euronex (a European Stock Exchange with also clearing and information services in which equities and derivatives are traded).

Currently, it is the largest stock exchange for capitalization with 16,613 billion of US dollars (2013) and with average trading value of 169 billion of US dollars (2013) a day or more in general with a trading volume of 12,693 billion of US dollars (2012). It provides a large range of financial products and services like equities, options, futures, ETPs, bonds, market data and commercial technology solutions.

The major indices of the NYSE are the following:

–          The NYSE Composite Index (NYA). It measures the performance of all common stocks (more than 1,900 U.S. and not U.S. stocks) listed on the NYSE, including REITs, ADRs and tracking stocks, excluding all ETFs, closed-end funds, limited partnerships and derivatives. The index is adjusted for not considering the effects of new listing and delisting and of capitalization changes. The base date is on December 31, 1965 and equals to 50 points. On January 2003 the base points changed into 5,000.

–          Dow Jones Industrial Average (DJI). It’s a price weighted index. It’s the average price of the 30 leading companies in major industries stocks. It refers to stocks listed in both NYSE and NASDAQ stock exchange. The Dow Jones is also know to be a blue-chip stock index (the companies to which the index refers have a reputation for quality, reliability and have the ability to operate with profits also in economic negative-cycles).

–          S&P 500 (GSPC). It’s a capitalization weighted index. The index is based on the market capitalization of 500 large companies those stocks are listed both on the NYSE and on NASDAQ. The index is adjusted in order to exclude all corporate actions that affect market capitalization. It’s one of the blue-chip indices.

–          Other indices are: the Dynamic Market Intellidex, NYSE 20+Treasury Bond, NYSE Arca Gold Miners,the NYSE U.S. 100 and the StrataQuant Materials.

NASDAQ: in 1971 the NASD (the National Association of Securities Dealers) founded NASDAQ. It was the first electronic stock market of the world. In 2000 NASDAQ was restructured and spun off into a publicly traded company. In 2001 NASDAQ bought the European Association of Securities Dealers Automatic Quotation System. The Association was renamed as NASDAQ Europe. NASDAQ Europe was closed and reopened as Equiduct. In 2006 NASDAQ changed its business from stock market to licensed national securities Exchange. In 2007 the Financial Industry Regulatory Authority was founded as the result of the merger between the NASD and the New York Stock Exchange’s regulation committee. In the same year NASDAQ started negotiations for buying OMX, a Swedish exchange operator. That’s  in order to create a global exchange and technology company. In 2008, the new company, obtained as the result of the merger  between NASDAQ and OMX, was named NASDAQ OMX GROUP. Later that year NASDAQ OMX GROUP bought the Philadelphia Stock Exchange.

Currently it is owed by the NASDAQ OMX Group.  It is the second stock exchange for capitalization with 4,582 billion of US dollars (2012) and with a trading value of 8,914 billion of US dollars (2012). The NASDAQ OMX Group offers financial products and services with regard to equities, options, commodities, derivatives fixed income, futures and structured products.

The major indices of the NASDAQ are the following:

–          NASDAQ Composite (IXIC). It’s a capitalization weighted index. It’s an index of common stocks, American Depositary Receipts, ordinary shares, Real Estate Investment Trusts, Shares of Beneficial Interest, tracking stocks and limited partnership interests listed on the NASDAQ stock market. It includes over 3,000 U.S. and not U.S. stocks/securities. It excludes closed-end funds, exchange traded funds, convertible debentures, preferred stocks, warrants, rights, units and other derivative securities.  

–          NASDAQ-100(NDX). It’s a capitalization weighted index.  It includes 100 of the largest U.S. and not U.S. non-financial companies (according to market capitalization criteria)listed on NASDAQ. It’s a blue-chip index.

–          Other indices are: the NASDAQ Capital Market Composite, the NASDAQ Global Market Composite, NASDAQ Global Market Composite, NASDAQ Global Select Market Composite, NASDAQ OMX 100 Index, NASDAQ OMX AeA Illinois Tech Index and the NASDAQ OMX Middle East North America Index, NASDAQ 100 Equal Weighted Index.

TOKYO STOCK EXCHANGE (TSE): it was founded in 1878 with the name of Tokyo Kabushiki Torihikijo. In 1943 the Tokyo Kabushiki Torihikijo stock exchange merged with ten of the biggest Japanese cities stock exchanges. The new  stock exchange name was Nippon Shōken Torihikisho. In 1945 due to the atomic bomb of Nagasaki the Nippon Shōken Torihikisho was closed and reorganized. In 1949 the Tokyo stock exchange reopened with its current name. In 1999 it switched into electronic trading for all the transactions. In 2001 it switched from an  incorporated association into  a stock company.

It’s the third stock exchange for capitalization with 3,478 billion of US dollars (2012) and with a trading value of 2,866 billion of US dollars (2012). It is characterized by 3 sections: the First Section for large companies, the Second Section for mid-sized companies and the Mothers section for high growth startup companies.

The major indices of the Tokyo Stock Exchange are the following:

–          NIKKEI 225 (N225). It’s an average price-weighted index. It tracks 225 Japanese common stocks listed on the First Section of the Tokyo Stock Exchange. It excludes REITs, ETFs, preferred equity contribution securities, tracking stocks other than common stocks. The constituents of the index are changed every year at the beginning of October  on the base of the Annual Review. It’s a blue-chip index.  

–          TOPIX (TPX). It’s a capitalization-weighted index. It tracks all Japanese common stocks listed in the First Section of the Tokyo Stock Exchange. The market capitalization base date is on January 4, 1968 and equals to 100 points.

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LONDON STOCK EXCHANGE GROUP (LSE): the London Stock Exchange was founded in London in 1801. In 2007 the London Stock Exchange acquired the “Borsa Italiana” to form the London Stock Exchange Group plc. In 2009 the Group acquired the Millennium Information Technologies Ltd. In 2011 the LSE Group merged with the Toronto Stock Exchange. In 2012, the Group bought a 5% stake in the Delhi Stock Exchange.

It is the fourth stock exchange for capitalization with 3,396 billion of US dollars (2012) and with a trading value of 1,890 billion of US dollars (2012). The London Stock Exchange Group is the oldest Stock Exchange and the most international with respect to all the other stock exchanges of the world. In fact it has companies from over 70 countries allowed to trading on its market. It offers the possibility to list companies of different sizes in different lists (the Premium Listed Main Market, the Alternative Investment Market, the Depository Receipt).

The major indices of the London Stock Exchange Group are the following:

–          FTSE 100 (FTSE). It’s a capitalization-weighted index. It consists of the largest 100 qualifyed UK companies. FTSE 100 is an index of blue-chip stocks on the LSE. The market capitalization base date is on January 3, 1984 and equals to 1000 points.

–          FTSE MIB (FTSEMIB.MI). It’s a capitalization-weighted index. The index consists of the 40 most-traded stock classes on Borsa Italiana. It’s assumed that the market capitalization base date is on June 1, 2009 and equals to 1000 points. Before the FTSE MIB it was used the S&P/MIB index.

–          Other indices are: FTSE 250, FTSE350, FTSE All-share, FTSE AIM UK 50, FTSE AIM UK 100, FTSE AIM All-share, FTSE TechMARK Focus, FTSE TechMARK mediscience, FTSE TechMARK All-share, FTSE ORB Indices, FTSE SmallCap, FTSE Eurotop300 and Ethical Indices.

EURONEXT N.V.: it was founded in 2000 as the result of the merger between the Amsterdam Stock Exchange, the Brussels Stock Exchange and the Paris Bourse. In 2002 there was the acquisition of the London International Financial Futures and Options Exchange (LIFFE). The LIFFE connect platform allowed the electronic trading. In the same year Euronext merged with the Bolsa de Valores de Lisboa e Porto. In 2005 Euronext opened Altermex. In 2007 the NYSE Group finished to merger with Euronex. The NYSE-Euronext  can be considered the “first global stock exchange”.

Euronex is the fifth stock exchange for capitalization with 2,930 billion of US dollars (2012) and with trading value of 1,900 billion of US dollars (2012).

The major Euronext indices are the following:

–          AEX (AEX). It’s a price index. The index consists of the 25 most-traded stock listed on Euronext Amsterdam. It’s weighted for capitalization. The base date is on January 3, 1983 and equals to 45.38 points.

–          BEL20 (BFX). It’s a price index. The index consists of stocks having a higher free float market capitalization than the entry level of the BEL 20 index multiplied by EUR 300,000 and adjusted free-float velocity of at least 35%. Adjusted free-float velocity is about 30% for companies that are already listed in the BEL20 index. The base date is on December 30, 1983 and equals to 1000 points.

–          CAC40 (FCHI).  It’s a price index. The index consists of stocks listed in Euronext Paris plus stocks observing some criteria. Companies ranking is made combining both the adjusted free-float market capitalization (it should be  at least 20%) and volumes. Then the 40 most representative stocks of Euronext are selected. The base date is on December 31, 1987 and equals to 1000 points.

–          PSI20 (PSI20.LS). It’s a price index. The index consists of the 20 most-traded stock listed on Euronext Lisbon. It’s a capitalization weighted index. The base date is on December 31, 1992 and equals to 3000 points.

–          Other index: LOW CARBON 100 EUROPE.

HONG KONG STOCK EXCHANGE (SEHK). It was formally established in 1891 in Hong Kong with the name of Association of Stockbrokers. In 1914 it was renamed in “Hong Kong Stock Exchange”. In 1921 there was the incorporation of the Hong Kong Stockbrokers’ Association in the Hong Kong Stock Exchange. In 1947 the Hong Kong Stockbrokers’ Association and the Honk Kong Stock Exchange merged. In 1980 the Hong Kong Stock Exchange, the Far East Exchange, the Kam Ngan Stock Exchange and the Kowloon Stock Exchange merged into a new company: the Stock Exchange of Hong Kong Limited. In 1986 a computer-assisted system trading was introduced. In the same year there was the incorporation of the Hong Kong Securities Clearing Company Limited. In 2000 the Stock Exchange of Hong Kong Limited (SEHK), the Hong Kong Futures Exchange Limited (HKFE) and the Hong Kong Securities Clearing Company Limited (HKSCC) merged under a single holding company, the Hong Kong Exchanges and Clearing Limited (HKEx). In 2012 the Hong Kong Stock Exchange made the acquisition of the London Metal Exchange.

The Hong Kong Stock Exchange is the sixth stock exchange for capitalization with 2,831 billion of US dollars (2012) and with trading value of 913 billion of US dollars (2012).

The major indices of the Hong Kong Stock Exchange Group are the following:

–          HANK SENG INDEX (HIS). It’s a capitalization-weighted index. Capital is freefloat-adjusted. It is composed by the 48 largest companies of Hong Kong. It’s a blue-chip index. The base date is on November 24, 1969 and equals to 100 points.

–          Other indices: HANG SENG CHINA ENTERPRISES index, HANG SENG AFFILIATED CORPORATIONS index, HANG SENG CHINA-H FINANCIAL index, HANG SENG CORPORATE SUSTAINABILITY index, HANG SENG MAINLAND 100, HANG SENG HK35, HANG SENG REIT index, HANG SENG CHINA 50 index, HANG SENG China AH Premium Index, HANG SENG China AH Smart Index, HANG SENG China A Industry Top Index.

SHANGHAI STOCK EXCHANGE (SSE): in 1891 it was founded the “Shanghai Sharebrokers’ Association”. The company was renamed as “Shanghai Stock Exchange” in 1904. In 1929 the Shanghai Securities& Commodities Exchange and the Shanghai Chinese Merchant Exchange merged into Shanghai Stock Exchange. It closed in 1949 due to the Communist revolution. In 1990 the Shanghai Stock Exchange reopened.

The Shanghai Stock Exchange is the seventh stock exchange for capitalization with 2,547 billion of US dollars (2012) and with a trading value of 2.176 billion of US dollars (2012). The SSE is not entirely opened to foreign investors. That’s because of the Chinese authorities that tight control on capital accounts. The securities listed in the Shanghai Stock Exchange include the three main categories of stocks, bonds (treasury bonds, corporate bonds, and convertible corporate bonds) and funds.

The major indices of the Shangai Stock Exchange Group are the following:

–          SSE COMPOSITE INDEX (000001.S S). It’s a weighted composite price index. The index consists in all listed stocks (A+B shares) at SSE. The base date is on July 15, 1991 and values 100 points.

–          Other indices: 12 SSE CONSTITUENT indices, other 10 SSE COMPOSITE indices, 30 SEE SECTOR indices, 26 STRATEGY indices, 12 SSE STYLE indices, 74 SSE THEMATIC indices, 1 SSE Fund Index, 18 SSE Bond Indices and 1 SSE Customized Index.

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