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Stock Exchanges (Alternative Investment Market (Some of the reasons why…
Stock Exchanges
Alternative Investment Market
Is the LSE's international market for smaller growing companies and is the most successful global growth market
Since its launch in 1995, in excess of 3,600 companies from around the world have joined AIM. These companies have raised in excess of £98 billion of development funds since the inception of AIM
Focus of AIM is to assist smaller and growing companies to expand
A wide spectrum of businesses including early stage venture capital backed companies and more established companies join AIM in order to seek access to this growth capital
AIM is designed mainly for the equities of small and medium sized growth companies with potentially less diversified business models or those that may not possess a proven rack record which would enable them to qualify for the main market
AIM companies may be considered higher risk compared to more established companies traded on the main market
May provide excellent investment opportunities for those wishing to purchase these equities
AIM is far more than an IPO market, rather it provides companies with high quality long term international liquidity combined with the ability to fund future growth
In the region of 60% of the money raised on AIM has been through further issues which demonstrates not only companies confidence in the markets but also that of investors
In addition to offering growing companies the advantages of a world class public market, it provides a regulatory environment which is designed specifically to match their needs
It has a balanced approach to regulation which is specifically suited for smaller companies
The rules are concise and principles based with a Nomad - nominated adviser - responsible for advising the company on the interpretation and compliance with rules
When a company has decided to seek a quotation on AIM, the first requirement is to identify and appoint a Nomad who will assist the company in its endeavours to come to the AIM
A Nomad would have a thorough understanding of the needs, aims, objectives and aspirations of the company seeking admission to AIM
Additional advisors, brokers and law firms, accountants, PR and Marketing will also be required to support the process
The company must provide admission documentation which includes information pertaining to its directors, financial position, business activities and strategy which will be prepared in consultation with the Nomad
Some of the reasons why AIM has been successful for small companies are as follows
Allows access to capital at floatation and for raising capital through further share issues
Creates a market for companies shares
Broadens the shareholder base
Allows existing shareholders to sell or reduce their holding - this is important for family business and individual taxation purposes
Offers a market valuation of a business
Share incentive schemes can be introduced for employees
Shares can be used for acquisition purposes
It provides access to institutional and private investors
International companies trading for at least 18 months on an IAM Designated Market, in another country may use their existing annual report and accounts for a complementary listing
It raises the profile and increases the credibility of a company
There are no minimum requirements as to the size of a company, its track record or the number of shares required to be issued. However in return a company must accept that with a quotation
Market conditions can change and this can affect share prices
Directors are accountable to shareholders and should be prepared for more openness, especially regarding financial position
The company will be subject to closer scrutiny
The company's perfjoamcne will be monitored more closely
The company will need to keep all investors aware of future plans and developments (without giving details to competitors)
The company may become the subject of a hostile takeover
London Stock Exchange
Merchants began dealing in stocks and shares in the seventeenth century
An informal market developed in the City of London over the years, resulting in New Jonathon's coffee house which developed into a stock exchange in 1773
Formally constituted in 1802
Largest stock exchange in the world until the First World War
Benefits from it's time zone in relation to other world markets; it closes as New York opens and opens as the Far East markets close which puts the LSE at the centre of the global financial market, catering for some of the largest and most successful companies in the world
One of the world's most dynamic regulated stock exchanges
Caters not only for new companies raising capital on the stock market, through an Initial Public Offering but also for further capital raising
Companies can join the main market or the AIM, which is designed to cater for smaller companies
Historically stock markets such as London were owned and operated by their members. Over the years the profile of shareholders of companies changed from individuals to institutions and companies that raised money on the exchanges moved from being mostly local to international. This change required greater capital for stock markets to operate effectively and in London the stock exchange underwent a major change in 1986
In 1986 more capital was injected through outside investors and changes in ownership of stocking firms. Commissions were replaced with negotiated commissions (at lower rates) and the 'two tier' system of jobbers and brokers was replaced with a single tier of brokers. These changes reflected the requirements of he government of the day and of the institutions
Institutions often traded in large volumes of shares and required a market of sufficient large liquidity and the capability of carrying out dealing instructions efficiently. The changes also helped to prevent trade moving from London to other exchanges around the world
Operates a broad range of international equity, bond and derivative markets, including the LSE, Borsa Italiana, MTS and the pan-European equities platform Turquoise
Turquoise
Operates in 15 European countries and is based in London
Provides a fully risk managed clearing solution using EuroCCP which is owned by the Depository Trust and Clearing Corporation of the USA and LCH.Clearnet
Offers
A displayed platform which is similar to existing exchanges
A public order book
A dark pool facility for its participants
NASDAW OMX
National Association of Securities Dealers Automated Quotation
In 2006, NASDAQ separated from NASD and, the following year, combined with the Swedish-Finnish financial services company OMX-AB
Leading participant in the exchange and technology sector, delivering trading, listing, financial market technology and public company services across six continents
Controls and operates the NASDAQ stock exchange in New York
Many technology companies are quoted on NASDAQ, especially those situated on the west coast of the US
Hong Kong Stock Exchange
Founded in 1891
Third largest exchange in Asia
ompanies that are incorporated in the People’s Republic of China and approved by the China Securities Regulatory Commission for a listing in Hong Kong are referred to as ‘H share’ companies
A company that has 30% of its shares held in aggregate, either directly or indirectly, by mainland Chinese entities is referred to as a ‘red chip’ company
Main index is Hang Send Index
Deutsche Börse
Founded in Frankfurt in 1585
Benefitted from the proximity of the Bundesbank, which decided on financial policy in Germany and the establishment of the European Central Bank in Frankfurt
Owns Eurex, the European futures and options exchange and Clearstream which provides integrated banking custody and settlement services
Covers the entire security exchange process form trading and clearing to settlement and securities, custody for equities, bonds and derivatives
Main trading index is the DAX 30
New York Stock Exchange
Currently the largest equity stock exchange in the world and the impact of movement in share prices in New York will be reflected on all other world markets
Trace its roots back to Wall Street where it was founded at the end of the eighteenth century
Dow Jones Industrial Average or the 'Dow' is one of the two market indices that reflect the movement in NYSE shares
Other main index is the NYSE Composite which covers all common stocks listed
Chicago Mercantile Exchange
Worlds largest futures and options exchange with trades based on interest rates, equity indicies, foreign exchange, energy, agricultural commodities, metals and alternative investment products such as weather
Most trades are executed on the CME Globex electronic trading platform
CME Clearing matches and settles its trades and acts as counterparty to every trade, thereby almost eliminating credit risk
Founded in 1898
Intercontinental Exchange
Acquired NYSE Euronext in November 2013
Largest operator of global exchanges, dealing in asset classes including interest rates, equities and equity derivatives, credit derivatives, bonds, foreign exchange, energy, metals and agricultural products
Founded in 2002 to trade OTC in the energy markets
BATS Europe
One of the leading equity market operators in the USA, operating four equities exchanges
Electronic based, ultra fast trade matching systems backed by investors including Citigroup, J.P Morgan Chase and Morgan Stanley
Has full regulatory approval and competes directly with the NYSE and NASDAQ in the USA
Chicago Board Options Exchange
Worlds largest option exchange with an annual trading volume of over one billion contracts each year
Offers options in over 2,000 companies as well as stock indices and ETFs
95% of orders by volume are traded electronically with the balance through open outcry
Tokyo Stock Exchange
Founded in 1878, and has combined over the years with ten other stock exchanges in Japan
Reopened in 1949 after closing after the Second World War
The main index used is the TOPIX Index
Euronext
First European integrated stock exchange was formed by the merger of Paris, Brussels and Amsterdam in September 2000
Euronext merged with the NYSE in April 2007 to form NYSE Euronext. NYSE Euronext was acquired by ICE in November 2013. In June 2014, Euronext became an independent European Stock Exchange
The main index of the Paris SE is the CAC 40
Chinese Stock Exchanges
Shanghai Stock Exchange was founded in 1990
Now has many listed companies referred to as red chips
The Shenzhen Stock Exchange was also founded in 1990 and is the second largest stock exchange in China. It is owned by the China Securities Depository and Clearing Co.
Singapore Exchange
Established in December 1999
Indices used are the MSCI Singapore Free Index and the Strait Times Index
Australian Securities Exchnage
Six important exchanges joined to form the ASX in 1987
S&P/ASX indices are calculated in real time by Standard & Poor's