Sagar international stock exchangeDocument Transcript
K.E.S. SHROFF COLLEGE Page 1
TITLE PAGE NO.
1. STOCK EXCHANGE 02
2. NEW YORK STOCK EXCHANGE (UNITED
3. NASDAQ (UNITED STATES) 12
4. LONDON STOCK EXCHANGE 15
5. TOKYO STOCK EXCHANGE 23
6. EURONEXT 26
7. FRANKFURT STOCK EXCHANGE 30
8. SHANGAI STOCK EXCHANGE 32
9. BME EXCHANGE 35
10. ITALIAN STOCK EXCHANGE 37
11. HONG KONG STOCK EXCHANGE 39
12. BIBILOGRAPHY 42
13. CONCLUSION 43
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An exchange is an institution, organization, or association which hosts a market where
stocks, bonds, options and futures, and commodities are traded. Buyers and sellers come
together to trade during specific hours on business days. Exchanges impose rules and
regulations on the firms and brokers that are involved with them. If a particular company
is traded on an exchange, it is referred to as "listed".
Companies that are not listed on a stock exchange are sold OTC (short for Over-The-
Counter). Companies that have shares traded OTC are usually smaller and riskier
because they do not meet the requirements to be listed on a stock exchange
A stock exchange is a form of exchange which provides services for stock brokers and
traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities
for issue and redemption of securities and other financial instruments, and capital events
including the payment of income and dividends. Securities traded on a stock exchange
include shares issued by companies, unit trusts, derivatives, pooled investment products
To be able to trade a security on a certain stock exchange, it must be listed there. Usually,
there is a central location at least for record keeping, but trade is increasingly less linked
to such a physical place, as modern markets are electronic networks, which gives them
advantages of increased speed and reduced cost of transactions. Trade on an exchange is
by members only.
The initial offering of stocks and bonds to investors is by definition done in the primary
market and subsequent trading is done in the secondary market. A stock exchange is
often the most important component of a stock market. Supply and demand in stock
markets are driven by various factors that, as in all free markets, affect the price of stocks
(see stock valuation).
There is usually no compulsion to issue stock via the stock exchange itself, nor must
stock be subsequently traded on the exchange. Such trading is said to be off exchange or
over-the-counter. This is the usual way that derivatives and bonds are traded.
Increasingly, stock exchanges are part of a global market for securities.
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NSE and BSE are the major stock exchanges of India
The National Stock Exchange (NSE)is stock exchange located at Mumbai, India. It is the
16th largest stock exchange in the world by market capitalization and largest in India by
daily turnover and number of trades, for both equities and derivative trading.NSE has a
market capitalization of around US$985 billion and over 1,646 listings as of December
2011.Though a number of other exchanges exist, NSE and the Bombay Stock Exchange
are the two most significant stock exchanges in India, and between them are responsible
for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty,
known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major
stocks weighted by market capitalisation.
NSE is mutually owned by a set of leading financial institutions, banks, insurance
companies and other financial intermediaries in India but its ownership and management
operate as separate entities.There are at least 2 foreign investors NYSE Euronext and
Goldman Sachs who have taken a stake in the NSE.As of 2006, the NSE VSAT
terminals, 2799 in total, cover more than 1500 cities across India.In 2011, NSE was the
third largest stock exchange in the world in terms of the number of contracts (1221
million) traded in equity derivatives.It is the second fastest growing stock exchange in the
world with a recorded growth of 16.6%.
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The Bombay Stock Exchange (BSE) (Bombay Śhare Bāzaār) (formerly, The Stock
Exchange, Bombay) is a stock exchange located on Dalal Street, Mumbai and is the
oldest stock exchange in Asia. The equity market capitalization of the companies listed
on the BSE was US$1 trillion as of December 2011, making it the 6th largest stock
exchange in Asia and the 14th largest in the world. The BSE has the largest number of
listed companies in the world.
As of March 2012, there are over 5,133 listed Indian companies and over 8,196 scrips on
the stock exchange, the Bombay Stock Exchange has a significant trading volume. The
BSE SENSEX, also called "BSE 30", is a widely used market index in India and Asia.
Though many other exchanges exist, BSE and the National Stock Exchange of India
account for the majority of the equity trading in India. While both have similar total
market capitalization (about USD 1.6 trillion), share volume in NSE is typically two
times that of BSE.
International stock exchanges
New York Stock Exchange (United States)
NASDAQ (United States)
London Stock Exchange (UK)
Tokyo Stock Exchange (Japan)
Euronext (Belgium, France, Netherlands, Portugal)
Frankfurt Stock Exchange (Germany)
Shanghai Stock Exchange (China)
BME Exchange (Spain)
Italian Stock Exchange (Italy)
Hong Kong Stock Exchange (Hong Kong)
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NEW YORK STOCK EXCHANGE (UNITED STATES)
The New York Stock Exchange, commonly referred to as the NYSE, is a stock exchange
located at 11 Wall Street, Lower Manhattan, New York City, New York, United States. It
is by far the world's largest stock exchange by market capitalization of its listed
companies at US$14.242 trillion as of Dec 2011. Average daily trading value was
approximately US$153 billion in 2008.
The NYSE is operated by NYSE Euronext (NYSE: NYX), which was formed by the
NYSE's 2007 merger with the fully electronic stock exchange Euronext. The NYSE
trading floor is located at 11 Wall Street and is composed of four rooms used for the
facilitation of trading. A fifth trading room, located at 30 Broad Street, was closed in
February 2007. The main building, located at 18 Broad Street, between the corners of
Wall Street and Exchange Place, was designated a National Historic Landmark in 1978,
as was the 11 Wall Street building.
Type Stock exchange
Location New York City, New York, United States
Founded March 8, 1817
Owner NYSE Euronext
Currency United States dollar
No. of listings 2,308
MarketCap US$ 14.242 trillion (Dec 2011)
Volume US$ 20.161 trillion (Dec 2011)
Indexes Dow Jones Industrial Average
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The origin of the NYSE can be traced to May 17, 1792, when the Buttonwood
Agreement was signed by 24stockbrokers outside of 68 Wall Street in New York under
a buttonwood tree on Wall Street. On March 8, 1817, the organization drafted a
constitution and renamed itself the "New York Stock & Exchange Board."Anthony
Stockholm was elected the Exchange's first president.
The first central location of the Exchange was a room, rented in 1792 for $200 a month,
located at 40 Wall Street. After that location was destroyed in the Great Fire of New
York in 1835, the Exchange moved to a temporary headquarters. In 1863, the New York
Stock & Exchange Board changed to its current name, the New York Stock Exchange. In
1865, the Exchange moved to 10–12 Broad Street.
The New York Stock Exchange was closed for ten days starting September 20, 1873,
because of the Panic of 1873.
The volume of stocks traded increased sixfold in the years between 1896 and 1901, and a
larger space was required to conduct business in the expanding marketplace.
New York City architects were invited to participate in a design competition for a new
building; ultimately, the Exchange selected the neoclassic designsubmitted by
architect George B. Post. Demolition of the Exchange building at 10 Broad Street, and
adjacent buildings, started on May 10, 1901.
The new building, located at 18 Broad Street, cost $4 million and opened on April 22,
1903. The trading floor, at 109 × 140 feet (33 × 42.5 m), was one of the largest volumes
of space in the city at the time, and had a skylight set into a 72-foot (22 m)-high ceiling.
The main façade of the building features six tall columns with Corinthian capitals, topped
by a marble pediment containing high-relief sculptures by John Quincy Adams
Ward with the collaboration of Paul Wayland Bartlett, carved by the Piccirilli Brothers,
representing Integrity Protecting the Works of Man. The building was listed as a National
Historic Landmark and added to the National Register of Historic Places on June 2, 1978.
In 1922, a building for offices, designed by Trowbridge & Livingston, was added at 11
Wall Street, as well as a new trading floor called the Garage. Additional trading floor
space was added in 1969 the Blue Room, and in 1988 the EBR or Extended Blue Room,
with the latest technology for information display and communication. Yet another
trading floor was opened at 30 Broad Street called the Bond Room in 2000. As the NYSE
introduced its hybrid market, a greater proportion of trading came to be executed
electronically, and due to the resulting reduction in demand for trading floor space, the
NYSE decided to close the 30 Broad Street trading room in early 2006. As the adoption
of electronic trading continued to reduce the number of traders and employees on the
floor, in late 2007, the NYSE closed the rooms created by the 1969 and 1988 expansions.
The Stock Exchange Luncheon Club was situated on the seventh floor from 1898 until its
closure in 2006.
The NYSE announced its plans to merge with Archipelago on April 21, 2005, in a deal
intended to reorganize the NYSE as a publicly traded company. NYSE's governing board
voted to merge with rival Archipelago on December 6, 2005, and become a for-profit,
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public company. It began trading under the name NYSE Group on March 8, 2006. A little
over one year later, on April 4, 2007, the NYSE Group completed its merger with
Euronext, the European combined stock market, thus forming the NYSE Euronext, the
first transatlantic stock exchange.
Presently, Marsh Carter is Chairman of the New York Stock Exchange, having
succeeded John S. Reedand the CEO is Duncan Niederauer, having succeeded John
The exchange was closed shortly after the beginning of World War I (July 31, 1914), but
it partially re-opened on November 28 of that year in order to help the war effort by
and completely reopened for stock trading in mid-December.
On September 16, 1920, a bomb exploded on Wall Street outside the NYSE building,
killing 33 people and injuring more than 400. The perpetrators were never found. The
NYSE building and some buildings nearby, such as the JP Morgan building, still have
marks on their façades caused by the bombing.
The Black Thursday crash of the Exchange on October 24, 1929, and the sell-off panic
which started on Black Tuesday, October 29, are often blamed for precipitating the Great
Depression of 1929. In an effort to try to restore investor confidence, the Exchange
unveiled a fifteen-point program aimed to upgrade protection for the investing public on
October 31, 1938.
On October 1, 1934, the exchange was registered as a national securities exchange with
the U.S. Securities and Exchange Commission, with a president and a thirty-three
member board. On February 18, 1971 the non-profit corporation was formed, and the
number of board members was reduced to twenty-five.
One of Abbie Hoffman's well-known publicity stunts took place in 1967, when he led
members of the Yippie movement to the Exchange's gallery. The provocateurs hurled
fistfuls of real dollars mixed with fake dollars toward the trading floor below. Some
traders booed, and some collected the apparent bounty.[
The press was quick to respond
and, by evening, the event had been reported around the world. (The stock exchange later
spent $20,000 to enclose the gallery with bulletproof glass.) Hoffman wrote a decade
later, "We didn’t call the press; at that time we really had no notion of anything called a
On October 19, 1987, the Dow Jones Industrial Average (DJIA) dropped 508 points, a
22.6% loss in a single day, the second-biggest one-day drop the exchange had
experienced, prompting officials at the exchange to invoke for the first time the "circuit
breaker" rule to halt all trading. This was a very controversial move and led to a quick
change in the rule; trading now halts for an hour, two hours, or the rest of the day when
the DJIA drops 10, 20, or 30 percent, respectively. The rationale behind the trading
halt was to give investors a chance to cool off and reevaluate their positions. Black
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Monday was followed by Terrible Tuesday, a day in which the Exchange's systems did
not perform well and some people had difficulty completing their trades.
Consequently there was another major drop for the Dow on October 13, 1989; the Mini-
Crash of 1989. The crash was apparently caused by a reaction to a news story of a
$6.75 billion leveraged buyout deal for UAL Corporation, the parent company of United
Airlines, which broke down. When the UAL deal fell through, it helped trigger the
collapse of the junk bond market causing the Dow to fall 190.58 points, or 6.91 percent.
Similarly, there was a panic in the financial world during the year of 1997; the Asian
Financial Crisis. Like the fall of many foreign markets, the Dow suffered a 7.18% drop in
value (554.26 points) on October 27, 1997, in what later became known as the 1997
Mini-Crash but from which the DJIA recovered quickly.
On January 26, 2000, an altercation during filming of the music video for "Sleep Now in
the Fire", which was directed by Michael Moore, caused the doors of the exchange to be
closed and the band Rage Against the Machine to be escorted from the site by
security. after band members attempted to gain entry into the exchange. Trading on the
exchange floor, however, continued uninterrupted
On May 6, 2010, the Dow Jones Industrial Average posted its largest intraday percentage
drop since the October 19, 1987 crash, with a 998 point loss later being called the Flash
Crash (as the drop occurred in minutes before rebounding). The SEC and CFTC
published a report on the event, although it did not come to a conclusion as to the cause.
The regulators found no evidence that the fall was caused by erroneous ("fat finger")
The New York Stock Exchange (sometimes referred to as "the Big Board") provides a
means for buyers and sellers to trade shares of stock in companies registered for public
trading. The NYSE is open for trading Monday through Friday from 9:30 am –
4:00 pm ET, with the exception of holidays declared by the Exchange in advance.
On the trading floor, the NYSE trades in a continuous auction format, where traders can
execute stock transactions on behalf of investors. They will gather around the appropriate
post where a specialist broker, who is employed by an NYSE member firm (that is,
he/she is not an employee of the New York Stock Exchange), acts as an auctioneer in
an open outcry auction market environment to bring buyers and sellers together and to
manage the actual auction. They do on occasion (approximately 10% of the time)
facilitate the trades by committing their own capital and as a matter of course disseminate
information to the crowd that helps to bring buyers and sellers together. The auction
process moved toward automation in 1995 through the use of wireless hand held
computers (HHC). The system enabled traders to receive and execute orders
electronically via wireless transmission. On September 25, 1995, NYSE member Michael
Einersen, who designed and developed this system, executed 1000 shares of IBM through
this HHC ending a 203 year process of paper transactions and ushering in an era
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As of January 24, 2007, all NYSE stocks can be traded via its electronic Hybrid
Market (except for a small group of very high-priced stocks). Customers can now send
orders for immediate electronic execution, or route orders to the floor for trade in the
auction market. In the first three months of 2007, in excess of 82% of all order volume
was delivered to the floor electronically.
NYSE works with US regulators like
the SEC and CFTC to coordinate risk management measures in the electronic trading
environment through the implementation of mechanisms like circuit breakers and
liquidity replenishment points.
Until 2005, the right to directly trade shares on the exchange was conferred upon owners
of the 1366 "seats". The term comes from the fact that up until the 1870s NYSE members
sat in chairs to trade. In 1868, the number of seats was fixed at 533, and this number was
increased several times over the years. In 1953, the number of seats was set at 1,366.
These seats were a sought-after commodity as they conferred the ability to directly trade
stock on the NYSE, and seat holders were commonly referred to as members of the
NYSE. The Barnes family is the only known lineage to have five generations of NYSE
members: Winthrop H. Barnes (admitted 1894), Richard W.P. Barnes (admitted 1926),
Richard S. Barnes (admitted 1951), Robert H. Barnes (admitted 1972), Derek J.
Barnes (admitted 2003). Seat prices varied widely over the years, generally falling during
recessions and rising during economic expansions. The most expensive inflation-adjusted
seat was sold in 1929 for $625,000, which, today, would be over six million dollars. In
recent times, seats have sold for as high as $4 million in the late 1990s and as low as
$1 million in 2001. In 2005, seat prices shot up to $3.25 million as the exchange entered
into an agreement to merge with Archipelago and become a for-profit, publicly traded
company. Seat owners received $500,000 in cash per seat and 77,000 shares of the newly
formed corporation. The NYSE now sells one-year licenses to trade directly on the
exchange. Licences for floor trading are available for $40,000 and a licence for bond
trading is available for as little as $1,000 as of 2010.
Neither are resell-able, but may
be transferable in during the change of ownership of a cooperation holding a trading
NYSE Composite Index
In the mid-1960s, the NYSE Composite Index (NYSE: NYA) was created, with a base
value of 50 points equal to the 1965 yearly close.
This was done to reflect the value of
all stocks trading at the exchange instead of just the 30 stocks included in the Dow Jones
Industrial Average. To raise the profile of the composite index, in 2003 the NYSE set its
new base value of 5,000 points equal to the 2002 yearly close.
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In 1792, The NYSE acquires its first traded securities. In 1817, The constitution of the
New York Stock and Exchange Board is adopted.
In 1867, The First Stock Ticker. In
1896, Dow Jones Industrial Average first published in The Wall Street Journal.
1903, NYSE moves into new quarters at 18 Broad Street. In 1906, Dow exceeds 100 on
January 12. In 1907, Panic of 1907. In 1914, World War I causes the longest exchange
shutdown: four months, two weeks; re-opening December 12 brings the largest one-day
percentage drop in the DJIA (24.4%). In 1915, Market price is given in dollars. In 1929,
Central quote system established; Black Thursday, October 24 and Black Tuesday,
October 29 signal the end of the Roaring Twenties bull market. In 1943, Trading floor is
opened to women. In 1949, Longest (eight-year) bull market begins.
In 1954, Dow surpasses its 1929 peak in inflation-adjusted dollars. In 1956, Dow closes
above 500 for the first time on March 12. In 1966, the NYSE begins a composite index of
all listed common stocks. This is referred to as the "Common Stock Index" and is
transmitted daily. The starting point of the index is 50. It is later renamed the NYSE
Composite Index. In 1967, Protesters led by Abbie Hoffman throw mostly fake dollar
bills at traders from gallery, leading to the installation of bullet-proof glass. In
1970, Securities Investor Protection Corporation established. In 1971, NYSE recognized
as Not-for-Profit organization. In 1972, Dow closes above 1,000 for the first time on
November 14. In 1977, Foreign brokers are admitted to NYSE. In 1980, New York
Futures Exchange established. In 1982, Longest bull market in DJIA history begins. In
1987, Black Monday, October 19, sees the second-largest one-day DJIA percentage drop
(22.6%) in history. In 1991, Dow exceeds 3,000. In 1995, Dow exceeds 5,000. In 1996,
Real-time ticker introduced. In 1999, Dow exceeds 10,000 on March 29. In 2000, Dow
peaks at 11,722.98 on January 14; first NYSE global index is launched under the ticker
In 2001, Trading in fractions (n/16) ends, replaced by decimals (increments of $.01,
see Decimalization). When the September 11, 2001 attacks occur, the NYSE was closed
for 4 sessions. In 2003, NYSE Composite Index relaunched and value set equal to 5,000
points. In 2006, NYSE and ArcaEx merge, creatingNYSE Arca and forming the publicly
owned, for-profit NYSE Group, Inc.; in turn, NYSE Group merges withEuronext,
creating the first trans-Atlantic stock exchange group; DJIA tops 12,000 on October 19.
In 2007, US President George W. Bush shows up unannounced to the Floor about an
hour and a half before a Federal Open Market Committee interest-rate decision on
January 31. NYSE announces its merger with theAmerican Stock Exchange; NYSE
Composite closes above 10,000 on June 1; DJIA exceeds 14,000 on July 19 and closes at
an all time peak of 14,164.53 on October 9. This was the peak before the 2008–2009
On September 15, 2008, the DJIA loses more than 500 points amid fears of bank failures,
resulting in a permanent prohibition of naked short selling and a three-week temporary
ban on all short selling of financial stocks; in spite of this, record volatility continues for
the next two months, culminating at 5½-year market lows. In 2009, Dow closes at
6547.05 on March 9 reaching a 12 year low. Returns to 10,015.86 on October 14.
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Derailed planned merger with Deutsche Börse
On February 15, 2011 NYSE and Deutsche Börse announced their merger to form a new
company, as yet unnamed, wherein Deutsche Börse shareholders will have 60%
ownership of the new entity, and NYSE Euronext shareholders will have 40%.
On February 1, 2012, the European Commission blocked the merger of NYSE with
Deutsche Börse, after commissioner Joaquin Almunia stated that the merger "would have
led to a near-monopoly in European financial derivatives worldwide". Instead, Deutsche
Börse and NYSE will have to sell either their Eurex derivatives or LIFFE shares in order
to not create a monopoly.
On February 2, 2012, NYSE Euronext and Deutsche Börse agreed with strong opposition
by the EU for the planned merger, to scrap the merger.
Regular trading hours are from 9:30 am to 4:00 pm Eastern Time
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NASDAQ (UNITED STATES)
The NASDAQ Stock Market, also known as simply the NASDAQ, is an American stock
exchange. "NASDAQ" originally stood for "National Association of Securities Dealers
Automated Quotations". It is the second-largest stock exchange by market
capitalization in the world, after the New York Stock Exchange. The exchange is owned
by NASDAQ OMX Group, which also owns the OMX stock exchange network.
Type Stock exchange
Location New York City, New York, U.S.
Founded February 4, 1971
Owner NASDAQ OMX Group
Currency United States dollar
No. of listings 2,784 (Dec 2011)
MarketCap US$ 4.44 trillion (Jan 2012)
Volume US$982 billion (Feb 2011)
Indexes NASDAQ Composite
NASDAQ Biotechnology Index
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NASDAQ was founded in 1971 by the National Association of Securities
Dealers (NASD), who divested themselves of it in a series of sales in 2000 and 2001. It is
owned and operated by the NASDAQ OMX Group, the stock of which was listed on its
own stock exchange beginning July 2, 2002, under the ticker symbol NASDAQ: NDAQ.
It is regulated by the Financial Industry Regulatory Authority (FINRA), the successor to
When the NASDAQ stock exchange began trading on February 8, 1971, it was the
world's first electronic stock market. At first, it was merely acomputer bulletin
board system and did not actually connect buyers and sellers
. The NASDAQ helped
lower the spread (the difference between the bid price and the ask price of the stock) but
somewhat paradoxically was unpopular among brokerages because they made much of
their money on the spread.
NASDAQ was the successor to the over-the-counter (OTC) system of trading. As late as
1987, the NASDAQ exchange was still commonly referred to as the OTC in media and
also in the monthly Stock Guides issued by Standard & Poor's Corporation.
Over the years, NASDAQ became more of a stock market by adding trade and volume
reporting and automated trading systems. NASDAQ was also the first stock market in the
United States to start trading online. Nobody before them had ever done this, highlighting
NASDAQ-traded companies (usually in technology) and closing with the declaration that
NASDAQ is "the stock market for the next hundred years." Its main index is
the NASDAQ Composite, which has been published since its inception. However, its
exchange-traded fund tracks the large-cap NASDAQ-100index, which was introduced in
1985 alongside the NASDAQ 100 Financial Index.
Until 1987, most trading occurred via the telephone, but during the October 1987 stock
market crash, market makers often didn't answer their phones. To counteract this,
the Small Order Execution System (SOES) was established, which provides an electronic
method for dealers to enter their trades. NASDAQ requires market makers to honor
trades over SOES.
In 1992, it joined with the London Stock Exchange to form the first intercontinental
linkage of securities markets. NASD spun off NASDAQ in 2000 to form a publicly
traded company, theNASDAQ Stock Market, Inc.
In 2006 NASDAQ changed from stock market to licensed national exchange.
On November 8, 2007, NASDAQ bought the Philadelphia Stock Exchange (PHLX) for
US$652 million. PHLX is the oldest stock exchange in America—having been in
operation since 1790.
To qualify for listing on the exchange, a company must be registered with the United
States Securities and Exchange Commission (SEC), have at least three market
makers (financial firms that act as brokers or dealers for specific securities) and meet
minimum requirements for assets, capital, public shares, and shareholders.
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In February, 2011, in the wake of an announced merger of NYSE
Euronext with Deutsche Börse, speculation developed that Nasdaq
and IntercontinentalExchange (ICE) could mount a counter-bid of their own for NYSE.
Nasdaq could be looking to acquire the American exchange's cash equities business, ICE
the derivatives business. As of the time of the speculation, "NYSE Euronext’s market
value was $9.75 billion. Nasdaq was valued at $5.78 billion, while ICE was valued at
$9.45 billion." Late in the month, Nasdaq was reported to be considering asking either
ICE or theChicago Merc to join in what would probably have to be, if it proceeded, an
$11–12 billion counterbid
EASDAQ (European Association of Securities Dealers Automatic Quotation System)
founded originally as a European equivalent to NASDAQ, it was purchased by NASDAQ
in 2001 and became NASDAQ Eur03, it shut down operations as a result of the burst of
the dot-com bubble. In 2007, NASDAQ Europe was revived as Equiduct and is currently
operating under Börse Berlin.
NASDAQ quotes are available at three levels:
Level 1 shows the highest bid and lowest offer—the inside quote.
Level 2 shows all public quotes of market makers together with information of
market dealers wishing to sell or buy stock and recently executed orders.
Level 3 is used by the market makers and allows them to enter their quotes and
NASDAQ has a pre-market session from 7:00am to 9:30am, a normal trading session
from 9:30am to 4:00pm and a post-market session from 4:00pm to 8:00pm .
NASDAQ Biotechnology Index
NASDAQ Transportation Index
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LONDON STOCK EXCHANGE
The London Stock Exchange is a stock exchange located in the City of London in the
United Kingdom. As of December 2011, the Exchange had a market capitalisation of
US$3.266 trillion (short scale), making it the fourth-largest stock exchange in the world
by this measurement (and the largest in Europe). The Exchange was founded in 1801 and
its current premises are situated in Paternoster Square close to St Paul's Cathedral in the
City of London. The Exchange is part of the London Stock Exchange Group.
Type Stock Exchange
Location London, England, United Kingdom
Click the blue globe to open an
Owner London Stock Exchange Group
No. of listings 2,864 (as of December 2011)
MarketCap US$3.2 trillion (Dec 2011)
Volume US$1.7 trillion (Dec 2009)
Indexes FTSE 100 Index
FTSE 250 Index
FTSE 350 Index
FTSE SmallCap Index
FTSE All-Share Index
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The Royal Exchange had been founded by Thomas Gresham on the model of
the Antwerp Bourse, as a stock exchange. It was opened by Elizabeth I in 1571.
During the 17th century, stockbrokers were not allowed in the Royal Exchange due to
their rude manners. They had to operate from other establishments in the vicinity,
notably Jonathan's Coffee-House. At that coffee house, a broker named John Casting
started listing the prices of a few commodities, exchange rates and certain key provisions
such as salt, coal and paper in 1698. Originally, this was not a daily list and was only
published a few days of the week.
This list and activity was later moved to Garraway’s coffee house. Public auctions during
this period were conducted for the duration that a length of tallow candle could burn;
these were known as "by inch of candle" auctions. As stocks grew, with new companies
joining to raise capital, the royal court also raised some monies. These are the earliest
evidence of organised trading in marketable securities in London.
After Gresham's Royal Exchange building was destroyed in the Great Fire of London, it
was rebuilt and re-established in 1669. This was a move away from coffee houses and a
step towards the modern model of stock exchange.
The Royal Exchange not only housed brokers but also merchants and merchandise. This
was the birth of a regulated stock market, which had teething problems in the shape of
unlicensed brokers. In order to regulate these, Parliament brought out an act in 1697 that
levied heavy penalties, both financial and physical to those brokering without a licence. It
also set a fixed number of brokers (at 100), which was later increased as the size of the
trade grew. This invariably led to several problems of its own, one of which was that the
traders had started leaving the Royal Exchange, either by their own virtues or through
expulsion and had started dealing in the streets of London. The street in which they were
now dealing was known as Change or Exchange Alleywhich was suitably placed close to
the Bank of England. Parliament tried to regulate this and ban the unofficial traders from
the Change streets.
Companies became weary of "bubbles" when companies rose quickly and fell, so they
persuaded Parliament to pass a clause preventing "unchartered" companies from forming.
After the Seven Years War (1756–1763), trade at Jonathan's coffee house boomed again.
In 1773, Jonathan, together with 150 other brokers, formed a club and opened a new and
more formal "Stock Exchange" in Sweeting's Alley. This now had a set entrance fee,
through which traders could enter the stock room and trade securities. It was, however,
not an exclusive location for trading, as trading also occurred in the Rotunda of the Bank
of England. Fraud was also rife during these times and in order to deter such dealings, it
was suggested that users of the stock room pay an increased fee. This was not met well
K.E.S. SHROFF COLLEGE Page 17
and ultimately, the solution came in the form of annual fees and turning the Exchange
into a Stock Subscription room.
The Subscription room created in 1801 was the first regulated exchange in London, but
the transformation was not welcomed by all parties. On the first day of trading, non-
members had to be expelled by a constable. In spite of the disorder, a new and bigger
building was planned, at Capel Court.
William Hammond laid the first foundation stone for the new building on 18 May. It was
finished on 30 December when "The Stock Exchange" was incised on the entrance.
First Rule Book
In the Exchange's first operating years, on several occasions there was a clear set of
regulations or fundamental laws missing for the Capel Court trading. In February 1812,
the General Purpose Committee confirmed a set of recommendations, which later became
the foundation of the first codified rule book of the Exchange. Even though the document
was not a complex one, topics as settlement and default were, in fact, quite
With its new governmental commandments and increasing trading volume in place, the
Exchange was progressively becoming an accepted part of the financial life in the City.
In spite of continuous criticism from newspapers and the public, the government used the
Exchange's organised market (and would most likely not have managed without) to raise
the enormous amount of money in the wars against Napoleon.
Foreign and regional exchanges
After the war and facing a booming world economy, foreign lending to countries such as
Brazil, Peru and Chile were a growing market. Notably, the Foreign Market at the
Exchange allowed for merchants and traders to participate as well and The Royal
Exchange hosted all transactions where foreign parties were involved. The ever-
increasing of overseas business meant eventually the dealing in foreign securities had to
be allowed within all of the Exchange's premises.
Just as London enjoyed its international growth forthcoming, the domestic Great Britain
also benefited from the economic boom. Two other cities were particularly showing great
business development, namely Liverpool and Manchester. Consequently, in 1836, both
the Manchester and Liverpool Stock Exchanges were opened. These were also times
when stockbroking was considered a real business profession and such attracted many
entrepreneurs. Nevertheless, with booms came busts, and in 1835 the ―Spanish panic‖ hit
the markets, also followed by a second one two years later. Some stocks soared by some
10, 20 and 30 pct, a week.
K.E.S. SHROFF COLLEGE Page 18
The Exchange before the World Wars
By June 1853, both participating members and brokers were taking up so much space that
the Exchange was now uncomfortably crowded and continual expansion plans were
taking place. Being already extended west, east and northwards, it was then decided the
Exchange needed an entire new establishment. Thomas Allason was appointed as the
main architect, and in March 1854 the new brick building inspired from the Great
Exhibition stood ready. This was a huge improvement of both surroundings and space,
with twice the floor space available.
By the late 1800’s, the telephone, ticker tape and the telegraph had been invented. Those
new technologies led to a revolution in the work of the Exchange.
First World War
Being the financial centre of the world, both the City and the Stock Exchange were hit
hard by the outbreak of the First World War in 1914. At first, prices surged due to a
rising fear that both borrowed money was to be called back and foreign banks would
demand their loans or raise interest. The decision of closing the Exchange for improved
breathing space and extension of the August Bank Holiday to prohibit a run on banks,
was hurried through by the Committee and Parliament, respectively. The Stock Exchange
ended up being closed from the end of July until the New Year, introducing again street
business as well as on the ―challenge system‖.
The Exchange was set to open again on 4 January 1915 under tedious restrictions, as
transactions were to be in cash only. Due to the limitations and challenges on trading
brought by the war, almost a thousand members quit the Exchange between 1914 - 18.
When peace time finally returned in November 1918, the post-war mood on the trading
floor was generally cowed.
In 1923 the Exchange received its own Coat of Arms, with the motto ―Dictum Meum
Pactum‖, My Word is My Bond.
Second World War
In 1937, experiences from the First World War made officials at the Exchange draw up
plans on how to handle a new war situation. One of the main concerns were air-raids and
the subsequent bombing of the Exchange's perimeters, and one suggestion was a move
to Denham. This however, never took place. On the first day of September 1939, the
Exchange closed its doors ―until further notice‖ and two days later, the declaration of war
was signed. Unlike from the prior war, the Exchange opened its doors again six days
later, on the 7th of September.
As the war escalated into its second year, the concerns for air raids were greater than
ever. Eventually, on the night of 29 December 1940 one of the greatest fires in London’s
history took place. The Exchange’s floor was hit by a clutch of incendiary bombs, which
fortunately were extinguished quickly. Trading on the floor was now drastically low and
most was done over the phone to reduce the possibility of injuries.
K.E.S. SHROFF COLLEGE Page 19
The Exchange was in fact only closed for only one more day during wartime, in 1945 due
to damage from a V-2 rocket, where trading continued in the house’s basement.
After some turbulent times, the stock market enjoyed some remarkable years in the late
1950s and business was indeed booming. This pushed the officials to find a more suitable
space for its new accommodation. The work on the new Stock Exchange Tower began in
1967. The Exchange’s new 321 feet high house had 26 storeys with Council and
Administration at the top, and middle floors let out to affiliate companies. Queen
Elizabeth II opened the building on 8 November 1972, and the finalised building was
now a new City landmark, with its 23,000 sq ft trading floor.
1973 marked the year of changes for the Stock Exchange. Firstly, two trading
prohibitions were to be abolished. A report from the Monopolies and Mergers
Commission recommended the admittance of both women and foreign-born members on
the floor. And secondly, in March the London Stock Exchange was to (formally)
amalgamate with the 11 British and Irish regional exchanges. This expansion led to the
creation of a new position of Chief Executive Officer, who after extensive search, was
given to Robert Fell. Governmental changes also continued in 1991, when the governing
Council of the Exchange was replaced with a Board of Directors drawn from the
Exchange’s executive, customer and user base. This also marked the first time the trading
name became 'The London Stock Exchange'.
FTSE 100 Index (Footsie 100) was launched by the Financial Times and Stock Exchange
partnership in February 1984. This turned out to be one of the most useful indices of all
and tracked the movements of the 100 leading companies listed on the Exchange.
The biggest happening of the 1980s was the sudden deregulation of the financial markets
in the UK in 1986. The phrase Big Bang was coined to describe measures including
abolition of fixed commission charges and of the distinction between stockjobbers and
stockbrokers on the London Stock Exchange, as well as change from an open-outcry to
electronic, screen-based trading.
In 1995 The Exchange launched the Alternative Investment Market, the AIM, to allow
growing companies to expand to international markets. Two years later the Electronic
Trading Service (SETS) was launched, bringing greater speed and efficiency to the
market. Following this, the CREST settlement service was also launched.
On the year of the new millennium, 2000, the Exchange's shareholders voted to become a
public limited company: London Stock Exchange plc. The LSE also transferred its role as
UK Listing Authority to the Financial Services Authority (FSA- UKLA)
K.E.S. SHROFF COLLEGE Page 20
EDX London, a new international equity derivatives business, was created in 2003 in
partnership with OM Group. The Exchange also acquired Proquote Limited, a new
generation supplier of real-time market data and trading systems.
The old Stock Exchange Tower became largely redundant with the advent of the Big
Bang, which deregulated many of the Stock Exchange's activities as it enabled an
increased use of computerised systems that allowed dealing rooms to take precedence
over face to face trading. Thus, in 2004, the House moved to a brand new headquarters
in Paternoster Square, close to St Paul's Cathedral.
In 2007 The London Stock Exchange merged with Borsa Italiana, creating the London
Stock Exchange Group (LSEG). The Group operates out of the Stock Exchange's
headquarters in Paternoster Square.
Issuer services help companies from around the world to join the London equity market
in order to gain access to capital. The LSE allows company to raise money, increase their
profile and obtain a market valuation through a variety of routes, thus following the firms
throughout the whole IPO process.
The London Stock Exchange runs several markets for listing, giving an opportunity for
different sized companies to list. International companies can list a number of products in
London including shares, depositary receipts and debt, offering different and cost-
effective ways to raise capital. In 2004 the Exchange opened a Hong Kong Office and
has attracted more than 200 companies from the Asia-Pacific region.
For the biggest companies exists the Premium Listed Main Market. This operates a Super
Equivalence method where conditions of both the UK Listing Authority as well as
London Stock Exchange’s own criteria have to be met. The largest IPO (Initial Publical
Offering) on the Exchange was completed in May 2011 by Glencore International plc.
The company raised $10bn at admission, making it one of the largest IPO ever.
In terms of smaller SME’s the Stock Exchange operates the Alternative Investment
Market (AIM). For international companies that fall outside of the EU, it operates the
Depository Receipt (DR) scheme as a way of listing and raising capital.
Amongst the benefits of joining one of the Exchanges markets are:
- Providing access to capital for growth and raise finance for further development
- Both broadening the shareholder base and creating a market for the company’s share
- Placing an objective market value on the company’s business
There are also two specialised markets:
Professional Securities Market This market facilitates the raising of capital through the
issue of specialist debt securities or depositary receipts (DRs) to professional investors.
K.E.S. SHROFF COLLEGE Page 21
The market operates under the status as a Recognised Investment Exchange, and by July
2011 it had 32 DRs, 108 Eurobonds and over 350 Medium Term Notes.
Specialist Fund Market Is the London Stock Exchange dedicated market, designed to
accept more sophisticated fund vehicles, governance models and security. It is suitable
only for institutional, professional and highly knowledgeable investors. The Specialist
Fund Market is an EU Regulated Market and thus securities admitted to the market are
eligible for most investor mandates providing a pool of liquidity for issuers admitted to
The securities available for trading on the London Stock Exchange are:
Exchange Traded Commodities
Global Depositary Receipts (GDRs)
There are two main markets on which companies trade on the LSE:
The home to some of the most well-established, largest and recognised companies in the
world. Over 1,300 companies from 60 different countries enjoy the balanced and
globally-respected standards of regulation and corporate governance that the London
Stock Exchange offers. Over the past 10 years over £366 billion has been raised through
new and further issues by Main Market companies. The FTSE 100 Index (―footsie‖) is
the main share index of the 100 most highly capitalised UK companies listed on the Main
Alternative Investment Market (“AIM”)
The London Stock Exchange’s international market for smaller growing companies. A
wide range of businesses including early stage, venture capital backed as well as more
established companies join AIM seeking access to growth capital. The AIM falls within
the classification of a Multilateral Trading Facility (MTF) as defined under
the MiFID directive in 2004, and such is a flexible market with a simpler admission
process for companies wanting to be publicly listed.
There are also several electronic platforms on which the different products trade.
- SETS (Stock Exchange electronic Trading Service) SETS is the London Stock
Exchange’s flagship electronic order book, trading indexed securities (FTSE100,
FTSE250, FTSE Small Cap Index constituents, Exchange Traded Funds, Exchange
K.E.S. SHROFF COLLEGE Page 22
Trading Products as well as other liquid AIM, Irish and London Standard listed
- SETSqx (Stock Exchange electronic Trading Services – quotes and crosses) SETSqx is
a trading platform for securities less liquid than those traded on SETS. This platform
combines a periodic electronic auction book four times a day with standalone non-
electronic quote driven market making.
- SEAQ SEAQ is the London Stock Exchange’s non-electronically executable quotation
service that allows market makers to quote prices in AIM securities and the Fixed Interest
International Trading Service
- IOB: The International Order Book offers easy and cost efficient access for traders
looking to invest in fast growing economies; for example, in Central and Eastern Europe,
Asia and the Middle East via depositary receipts (DRs). It is based on an electronic order
book similar to SETS.
- European Quoting Service: the European Quoting Service is a service that enables
clients to meet their pre-trade pan-European transparency obligations.
- A pan-European trade reporting service that enables clients to meet their post-trade
reporting obligations whether trading on or off Exchange.
The trading of derivatives products is also available on the Turquoise platform (ex EDX
London). The available products are Norwegian Futures and options on Norwegian single
stocks and indices, Russian futures and options on the most liquid IOB Depositary
Receipts, Futures and options on the FTSE RIOB index as well as futures on the FTSE
100. Futures and options on the most liquid European stock underlyings as well as on
European benchmark indices are expected to be launched in Q4 2011 and Q1 2012
subject to FSA approval.
K.E.S. SHROFF COLLEGE Page 23
TOKYO STOCK EXCHANGE
The Tokyo Stock Exchangeor TSE for short, is a stock exchange located in Tokyo, Japan.
It is the third largest stock exchange in the world by aggregate market capitalization of its
listed companies. It had 2,292 listed companies with a combined market capitalization of
US$3.3 trillion as of December 2011.
In July 2012 a planned merger with the Osaka Securities Exchange was approved by the
Japan Fair Trade Commission. The resulting entity, the Japan Exchange Group , will be
launched on January 2013.
Type Stock exchange
Location Tokyo, Japan
Owner Tokyo Stock Exchange Group, Inc.
Currency Japanese yen
No. of listings 2,292
MarketCap US$3.3 trillion (Dec 2011)
Volume US$3.9 trillion (Dec 2011)
Indexes Nikkei 225
K.E.S. SHROFF COLLEGE Page 24
The Tokyo Stock Exchange was established on May 15, 1878, as the Tokyo Kabushiki
Torihikijo under the direction of then-Finance Minister Okuma Shigenobu and capitalist
advocate Shibusawa Eiichi. Trading began on June 1, 1878.
In 1943, the exchange was combined with ten other stock exchanges in major Japanese
cities to form a single Japanese Stock Exchange . The combined exchange was shut down
and reorganized shortly after the bombing of Nagasaki.
The Tokyo Stock Exchange reopened under its current Japanese name on May 16, 1949,
pursuant to the new Securities Exchange Act.
The TSE runup from 1983 to 1990 was unprecedented, in 1990 it accounted for over 60%
of the world's stock market capitalization (by far the world's largest) before falling
precipitously in value and rankings today, but still remains one of the 3 largest exchanges
in the world by market capitalization of listed shares.
The current TSE building was opened on May 23, 1988, replacing the original TSE
building from 1931, and the trading floor of the TSE was closed on April 30, 1999, so
that the exchange could switch to electronic trading for all transactions. A new facility,
called TSE Arrows , opened on May 9, 2000. In 2010, the TSE launched its Arrowhead
In 2001, the TSE restructured itself as a stock company: before this time, it was
structured as an incorporated association with its members as shareholders.
The exchange was only able to operate for 90 minutes on November 1, 2005, due to bugs
with a newly installed transactions system, developed byFujitsu, which was supposed to
help cope with higher trading volumes. The interruption in trading was the worst in the
history of the exchange. Trading was suspended for four-and-a-half hours.
During the initial public offering of advertising giant Dentsu, in December 2001, a trader
at UBS Warburg, the Swiss investment bank, sent an order to sell 610,000 shares in this
company at ¥1 each, while he intended to sell 1 share at ¥610,000. The bank lost £71
During yet another initial public offering, that of J-Com, on December 8, 2005, an
employee at Mizuho Securities Co., Ltd. mistakenly typed an order to sell 600,000 shares
at ¥1, instead of an order to sell 1 share at ¥600,000. Mizuho failed to catch the error; the
Tokyo Stock Exchange initially blocked attempts to cancel the order, resulting in a net
loss of US$347 million to be shared between the exchange and Mizuho. Both companies
are now trying to deal with their troubles: lack of error checking, lack of safeguards, lack
of reliability, lack of transparency, lack of testing, loss of confidence, and loss of profits.
On 11 December, the TSE acknowledged that its system was at fault in the Mizuho trade.
On 21 December, Takuo Tsurushima, chief executive of the TSE, and two other senior
executives resigned over the Mizuho affair.
K.E.S. SHROFF COLLEGE Page 25
On January 17, 2006, the Nikkei 225 fell 2.8%, its fastest drop in nine months, as
investors sold stocks across the board in the wake of a raid by prosecutors on internet
company livedoor. The Tokyo Stock Exchange closed early on January 18 due to the
trade volume threatening to exceed the exchange's computer system's capacity of 4.5
million trades per day. This was called the "livedoor shock". The exchange quickly
increased its order capacity to five million trades a day.
The exchange's normal trading sessions are from 09:00 a.m. to 11:30 a.m. and from 12:30
p.m. to 3:00 p.m. on all days of the week except Saturdays, Sundays and holidays
declared by the Exchange in advance. The exchange is closed for the following
holidays: New Year's Day, Coming of Age Day, National Foundation Day, Vernal
Equinox Day, Shōwa Day, Constitution Memorial Day, Greenery Day, Children's
Day, Marine Day, Respect for the Aged Day, Autumnal Equinox, Health and Sports
Day, Culture Day, Labour Thanksgiving Day, and The Emperor's Birthday.
The London Stock Exchange (LSE) and the TSE are developing jointly traded products
and share technology, marking the latest cross-border deal among bourses as international
competition heats up. The TSE is also looking for some partners in Asia, and more
specifically is seeking an alliance with the Singapore Exchange (SGX), which is
considered as becoming a leading financial hub in the Asia-Pacific region. Recently,
some rumors close to the deal suggest that the TSE is preparing for a takeover of the
SGX, or at least take a major stake, in the first semester of 2008. The TSE has already
acquired a 5% stake in the SGX as of June 2007, deemed to be only the beginning of
In July 2008 the London Stock Exchange (LSE) and the TSE announced a new joint
venture Tokyo-based market, which will be based on the LSE's Alternative Investment
K.E.S. SHROFF COLLEGE Page 26
Euronext N.V. is a European electronic stock exchange based in Amsterdam,
Netherlands, and with subsidiaries in Belgium, France, Netherlands, Portugal and the
United Kingdom. In addition to equities and derivatives markets, the Euronext group
provides clearing and information services. As of December 2010, markets run by
Euronext had a market capitalization of US$2.93 trillion, making it the 5th largest
exchange in the world. Euronext merged with NYSE Group, Inc. on April 4, 2007 to
form NYSE Euronext (Euronext: NYX), the "first global stock exchange".
Type Stock exchange
Location Amsterdam, Netherlands
Founded September 22, 2000
Owner NYSE Euronext
No. of listings 1,176
MarketCap US$ 2.93 trillion (Dec 2010)
Volume US$ 1.9 trillion (Dec 2009)
Indexes Euronext 100
EURO Stoxx 50
K.E.S. SHROFF COLLEGE Page 27
Euronext was formed on 22 September 2000 following a merger of the Amsterdam Stock
Exchange, Brussels Stock Exchange, and Paris Bourse, in order to take advantage of the
harmonization of the European Union financial markets. In December 2001, Euronext
acquired the shares of theLondon International Financial Futures and Options
Exchange (LIFFE), which continues to operate under its own governance. Beginning in
early 2003, all derivatives products traded on its affiliated exchanges trade on
LIFFECONNECT, LIFFE's electronic trading platform. In 2002 the group merged with
the Portuguese stock exchange Bolsa de Valores de Lisboa e Porto (BVLP),
renamed Euronext Lisbon. Hours of operation on non-holidays are 9:00-17:30 CET.
Structure and indices
Euronext has cross-membership and cross-access agreements with the Warsaw Stock
Exchange for their cash and derivatives products, and with the Helsinki Exchanges on
cash trading; ownership agreements are currently excluded. The Euronext List
encompasses all quoted companies. It has two segments; NextEconomy, consisting of
companies whose equities are traded continuously and are active in sectors such as
information technology and biotechnology, and NextPrime, consisting of companies in
more traditional sectors that are traded continuously. Inclusion in the segments is
Euronext manages two broad-based indices. The Euronext 100 Index is the blue
chip index. The Next 150 Index is a market capitalisation index of the 150 next largest
stocks, representing the large- to mid-capitalisation segment of listed stocks at Euronext.
The NextEconomy and NextPrime segments each have a price index and a total return
index, weighted by market capitalisation and excluding the shares listed in the Euronext
100 Index. The indices have a base date of 31 December 2001, with a starting level of
1000 points. Six NextWeather weather indices for France, launched in January 2002, are
among the sector indices planned by Euronext.
Exchange traded funds, called trackers, comprise Euronext's NextTrack product segment,
and have been introduced on the AEX index, CAC 40, Euro Stoxx 50, and various pan-
European regional and sector indices. Euronext has introduced several commodity futures
contracts, available to all constituents. Winefex Bordeaux futures are traded on Euronext
Paris. Euronext.liffe is the subsidiary of Euronext responsible for all options andfutures
contracts trading, formed by the merger of the derivatives activities of the various
constituents of Euronext with LIFFE.
K.E.S. SHROFF COLLEGE Page 28
Euronext.liffe was formed in January 2002 from the takeover of the London International
Financial Futures and Options Exchange by Euronext. The derivatives activities of the
other constituent exchanges of Euronext (Amsterdam, Brussels, Lisbon and Paris), were
merged into Euronext.liffe. Trading is done electronically through the LIFFE CONNECT
platform. Euronext.liffe offers a wide range of futures and option products on short-term
interest rates, bonds, swaps, equities and commodities.
In addition to this, it sells its technology to third parties. Since April 2003, the Tokyo
International Financial Futures Exchange has run on LIFFE CONNECT. Furthermore,
from January 2004 until its merger with the Chicago Mercantile Exchange in 2008,
the Chicago Board of Trade provided electronic trading via e-cbot, which was powered
by LIFFE CONNECT. As a result, the Kansas City Board of Trade and the Minneapolis
Grain Exchange used LIFFE CONNECT for their overnight trading.
Alternext was formed in 2005 by Euronext to help small and mid-class companies in the
Eurozone seek financing. Since the merger of Euronext and NYSE since 2006, now
completed in 2007, this market is now a division of NYSE Euronext, named NYSE
Merger with NYSE
Due to apparent moves by NASDAQ to acquire the London Stock Exchange, NYSE
Group, owner of the New York Stock Exchange, offered €8 billion (US$10.2b) in cash
and shares for Euronext on 22 May 2006, outbidding a rival offer for the European Stock
exchange operator from Deutsche Börse, the German stock market. Contrary to
statements that it would not raise its bid, on 23 May 2006, Deutsche Börse unveiled a
merger bid for Euronext, valuing the pan-European exchange at €8.6 billion (US$11b),
€600 million over NYSE Group's initial bid. Despite this, NYSE Group and Euronext
penned a merger agreement, subject to shareholder vote and regulatory approval. The
initial regulatory response by SEC chief Christopher Cox (who was coordinating heavily
with European counterparts) was positive, with an expected approval by the end of 2007.
The new firm, tentatively dubbed NYSE Euronext, would be headquartered in New York
City, with European operations and its trading platform run out of Paris. Then-
NYSE CEO John Thain, who was to head NYSE Euronext, intended to use the
combination to form the world's first global stock market, with continuous trading of
stocks and derivatives over a 21-hour time span. In addition, the two exchanges hoped to
add Borsa Italiana (the Milan stock exchange) into the grouping.
K.E.S. SHROFF COLLEGE Page 29
Deutsche Börse dropped out of the bidding for Euronext on 15 November 2006,
removing the last major hurdle for the NYSE Euronext transaction. A run-up of NYSE
Group's stock price in late 2006 made the offering far more attractive to Euronext's
shareholders. On 19 December 2006, Euronext shareholders approved the transaction
with 98.2% of the vote. Only 1.8% voted in favour of the Deutsche Börse offer. Jean-
François Théodore, the Chief Executive Officer of Euronext, stated that they expected the
transaction to close within three or four months. Some of the regulatory agencies with
jurisdiction over the merger had already given approval. NYSE Group shareholders gave
their approval on 20 December 2006. The merger was completed on 4 April 2007,
forming NYSE Euronext.
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FRANKFURT STOCK EXCHANGE
FrankfurtStockExchange.de is the leading independently owned source for information
on companies listed on the Frankfurt Stock Exchange Entry Standard (Open Market)
segment, as well as the General Standard and Prime Standard segments of the German
Regulated Market. More than 65 percent of the total trades on the Frankfurt Stock
Exchange were from countries outside Germany, making FrankfurtStockExchange.de the
preferred international source for fast, free, reliable and complete information.
Free information provided includes free stock quotes, press releases, DAX and other
index information, select upcoming IPOs, plus a view of the activities of over 250
international trading institutions and more than 4,500 traders worldwide that trade the
Frankfurt Stock Exchange. It is a direct source for global investors to find up-to-date
public information on Frankfurt listed stocks and bonds, featured companies and trading
information. It also provides targeted advertising reach to over 85 percent of world
FrankfurtStockExchange is not affiliated with Deutsche Boerse. It is independently
owned by the Swiss International Finance Group, AG ("SIFG") which provides resources
and professional assistance to international companies seeking to go public on the
Frankfurt Stock Exchange and raise capital. Companies interested in listing and
conducting an IPO on the Frankfurt Stock Exchange contact SIFG.
Type Stock Exchange
Location Frankfurt am Main, Germany
Coordinates 50°06′55″N 8°40′40″E
Owner Deutsche Börse, Scoach Europa
MarketCap US$1.3 trillion (January 2012)
K.E.S. SHROFF COLLEGE Page 31
The origins of the Frankfurt Stock Exchange go back to the 9th century and a free letter
by Emperor Louis the German to hold free trade fairs. By the 16th century Frankfurt
developed into a wealthy and busy city with an economy based on trade and financial
Frankfurt Stock Exchange floor
In 1585 a bourse was established to set up fixed currency exchange rates. During the
following centuries Frankfurt developed into one of the world's first stock exchanges -
next to London and Paris. Bankers like Mayer Amschel Rothschild and Max
Warburg had substantial influence on Frankfurt's financial trade.
In 1874 Frankfurt Stock Exchange moved into its new building at Börsenplatz.
It was only in 1949 after World War II that the Frankfurt Stock Exchange finally
established as the leading stock exchange in Germany with consequently incoming
national and international investments.
During the 1990s the Frankfurt Stock Exchange was also bourse for the Neuer
Markt (German for New Market) as part of the world wide dot-com boom.
In 1993 the Frankfurter Wertpapierbörse (Frankfurt Stock Exchange) became Deutsche
Börse AG, operating businesses for the exchange.
From the early 1960s onwards the Frankfurt Stock Exchange took advantage of the close
by Bundesbankwhich effectively decided on financial policies in Europe until the
introduction of the euro in 2002. Since then the exchange profits from the presence of
the European Central Bank in Frankfurt am Main.
In 2002 and 2004 Deutsche Börse was in advanced negotiations to take over London
Stock Exchange, which were broken off in 2005
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SHANGAI STOCK EXCHANGE
The Shanghai Stock Exchange (SSE) is a stock exchange that is based in the city of
Shanghai, China. It is one of the two stock exchanges operating independently in the
People's Republic of China, the other is the Shenzhen Stock Exchange. Shanghai Stock
Exchange is the world's 5th largest stock market by market capitalization at US$2.3
trillion as of Dec 2011. Unlike the Hong Kong Stock Exchange, the Shanghai Stock
Exchange is still not entirely open to foreign investors due to tight capital account
controls exercised by the Chinese mainland authorities.
The current exchange was re-established on November 26, 1990 and was in operation on
December 19 of the same year. It is a non-profit organization directly administered by the
China Securities Regulatory Commission (CSRC).
Type Stock Exchange
Location Shanghai, China
No. of listings 932 (May 2012)
MarketCap US$2.3 trillion (Dec 2011)
Volume US$0.5 trillion (Dec 2009)
Indexes SSE Composite
K.E.S. SHROFF COLLEGE Page 33
The formation of the International Settlement (foreign concession areas) in Shanghai was
the result of the Treaty of Nanking of 1842 (which ended the First Opium War) and
subsequent agreements between the Chinese and foreign governments were crucial to the
development of foreign trade inChina and of the foreign community in Shanghai. The
market for securities trading in Shanghai begins in the late 1860s. The first shares list
appeared in June 1866 and by then Shanghai's International Settlement had developed the
conditions conducive to the emergence of a share market: several banks, a legal
framework for joint-stock companies, and an interest in diversification among the
established trading houses (although the trading houses themselves remained
In 1891 during the boom in mining shares, foreign businessmen founded the "Shanghai
Sharebrokers' Association" headquartered in Shanghai as China's first stock exchange. In
1904 the Association applied for registration in Hong Kong under the provision of the
Companies ordinance and was renamed as the "Shanghai Stock Exchange". The supply
of securities came primarily from local companies. In the early days, banks dominated
private shares but, by 1880, only the Hong Kong and Shanghai local banks remained.
Later in 1920 and 1921, "Shanghai Securities & Commodities Exchange" and "Shanghai
Chinese Merchant Exchange" started operation respectively. An amalgamation eventually
took place in 1929, and the combined markets operated thereafter as the "Shanghai Stock
Exchange". Shipping, insurance, and docks persisted to 1940 but were overshadowed by
industrial shares after theTreaty of Shimonoseki of 1895, which permitted Japan, and by
extension other nations which had treaties with China, to establish factories in Shanghai
and other treaty ports. Rubber plantations became the staple of stock trading beginning in
the second decade of the 20th century.
By the 1930s, Shanghai had emerged as the financial center of the Far East, where both
Chinese and foreign investors could trade stocks, debentures, government bonds,
and futures. The operation of Shanghai Stock Exchange came to an abrupt halt
after Japanese troops occupied the Shanghai International Settlement on December 8,
1941. In 1946, Shanghai Stock Exchange resumed its operations before closing again 3
years later in 1949, after the Communist revolution took place.
After the Cultural Revolution ended and Deng Xiaoping rose to power, China was re-
opened to the outside world in 1978. During the 1980s, China's securities market evolved
in tandem with the country's economic reform and opening up and the development of
socialist market economy. On 26 November 1990, Shanghai Stock Exchange was re-
established and operations began a few weeks later on 19 December.
K.E.S. SHROFF COLLEGE Page 34
The securities listed at the SSE include the three main categories of stocks, bonds,
and funds. Bonds traded on SSE include treasury bonds (T-bond), corporate bonds, and
convertible corporate bonds. SSE T-bond market is the most active of its kind in China.
There are two types of stocks being issued in the Shanghai Stock Exchange: "A" shares
and "B" shares. A shares are priced in the local renminbi yuan currency, while B shares
are quoted in U.S. dollars. Initially, trading in A shares are restricted to domestic
investors only while B shares are available to both domestic (since 2001) and foreign
investors. However, after reforms were implemented in December 2002, foreign
investors are now allowed (with limitations) to trade in A shares under the Qualified
Foreign Institutional Investor (QFII) program which was officially launched in 2003.
Currently, a total of 98 foreign institutional investors have been approved to buy and sell
A shares under the QFII program. Quotas under the QFII program are currently US$30
billion. There has been a plan to eventually merge the two types of shares in the future.
The SSE is open for trading every Monday to Friday. The morning session begins with
centralized competitive pricing from 09:15 to 09:25, and continues with consecutive
bidding from 09:30 to 11:30. This is followed by the afternoon consecutive bidding
session, which starts from 13:00 to 15:00. The market is closed on Saturday and Sunday
and other holidays announced by the SSE.
The SSE Composite (also known as Shanghai Composite) Index is the most commonly
used indicator to reflect SSE's market performance. Constituents for the SSE Composite
Index are all listed stocks (A shares and B shares) at the Shanghai Stock Exchange. The
Base Day for the SSE Composite Index is December 19, 1990. The Base Period is the
total market capitalization of all stocks of that day. The Base Value is 100. The index was
launched on July 15, 1991. At the end of 2006, the index reaches 2,675.47. Other
important indexes used in the Shanghai Stock Exchanges include the SSE 50 Index and
SSE 180 Index.
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Bolsas y Mercados Españoles (BME) is the Spanish company that deals with the
organizational aspects of the Spanish stock exchanges and financial markets, which
includes the stock exchanges in Madrid, Barcelona, Bilbao and Valencia. In addition to
the trading of shares and bonds, BME offers access to a number of other products
(warrants, trackers) and the clearing and settlement of operations. BME is also
developing a technological consultancy, operating in 23 countries and mainly providing
BME has been a listed company since 14 July 2006 and an IBEX 35 constituent since
Traded as BMAD: BME
Headquarters Madrid, Spain
trading platforms,derivatives and fixed
incomemarkets, clearing, market
Profit €154.2 million (2010)
Employees 700 (end 2010)
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Bolsas y Mercados Españoles (BME) is the operator of all stock Markets and financial
systems in Spain. BME has been a listed company since 14 July 2006 and an IBEX 35®
constituent since July 2007. In the last few years it has become a reference in the sector in
terms of solvency, efficiency and profitability.
BME is a high technological company with a highly skilled workforce. It has the know-
how and resources necessary to offer a wide range of services, products and advanced
trading and global market access systems to issuers, intermediaries and investors,
whether in Spain or elsewhere.
BME is a highly diversified company structured into seven business-units which
represents the broadest and most varied range of products and services that a company in
its sector can offer to the financial community: Equities, Public and Corporate Debt,
Derivatives, Clearing and Settlement, Information Dissemination, Consultancy, New
Technologies and Training.
BME comprises over 20 subsidiaries, among which some of the most prominent are
Bolsa de Madrid, Bolsa de Barcelona, Bolsa de Bilbao, Bolsa de Valencia, AIAF
Mercado de Renta Fija, MEFF, IBERCLEAR, MAB, Visual Trader BME Consulting,
BME Innova, BME Market Data and Infobolsa. For more information on BME's
subsidiaries, see "BME Groups Companies".
BME is the repository of a long tradition of financial culture and best practice as well as
the trust placed in it by millions of Spanish and foreign investors. The Spanish stock
exchanges, markets and financial systems all make a dynamic and modern company
thanks to its capacity to anticipate changes, its innovation and responsibility, all of which
have strengthened its financial solvency and allowed the company to boast a solid
international presence, especially in Latin America.
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ITALIAN STOCK EXCHANGE
The Borsa Italiana S.p.A., based in Milan, is Italy's main stock exchange. It was
privatised in 1997 and is a part of the London Stock Exchange Group plc since 2007. In
2005, the companies listed on the Borsa were worth US$890 billion. It is also informally
known as Piazza Affari ("Business Square"), after the city square of Milan where its
headquarters (the Palazzo Mezzanotte building) is located.
Type Società per Azioni (Public Limited
Industry Financial services
Founded 16 January 1808
Headquarters Milan, Italy
Products Stock market
Parent London Stock Exchange
The Milan Stock Exchange was established by Eugène de Beauharnais, viceroy of the
Napoleonic Kingdom of Italy, through decrees dated 16 January and 6 February 1808. It
operated under public ownership until 1998.
It was sold to a consortium of banks, and operated under a joint-stock holding company
between 2 January 1998 and on 1 October 2007, when it was merged with the London
Stock Exchange in an all-share takeover.
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Borsa Italiana has managing responsibility for Italy's derivatives markets (IDEM and
MIF) and its fixed income market (MOT). On the MOT (Electronic Government Bond
and Securities Market), buy and sell contracts are traded on government securities and
nonconvertible bonds; the EuroMOT is the Euro-Bond Electronic Market that trades
Eurobonds, bonds from foreign issuers and asset-backed securities.
The exchange has pre-market sessions from 08:00am to 09:00am, normal trading sessions
from 09:00am to 05:25pm and post-market sessions from 06:00pm to 08:30pm on all
days of the week except Saturdays, Sundays and holidays declared by the Exchange in
Borsa Italiana organises and manages the Italian stock market with the participation of
nearly 130 domestic and international brokers that operate in Italy or from abroad
through remote membership, using a completely electronic trading system for the real-
time execution of trades. In addition, it performs organisational, commercial and
promotional activities aimed at developing high value-added services for the financial
The stock market is divided into five parts: 1) The electronic share market (MTA) trades
Italian shares, convertible bonds, and warrants; the covered-warrant market is an
electronic share market. 2)
The STAR (Segment for High Requirement Shares) market is within the MTA and
includes companies capitalised from 40 million to 100 million euros that are already
listed and traded in more-traditional sectors. 3) Nuovo Mercato is dedicated to
innovation-driven companies. 4) Stocks, bonds, warrants, and options not admitted to the
official exchange are traded on Mercato Ristretto. 5) Premi Market is for premium
contracts on stock exchange products. The after-hours market enables trading of financial
instruments after the daytime session closes.
A principle of the exchange has been the separation of regulation and management,
allowing the exchange to be entrepreneurial while maintaining confidence in the market
through the external regulators CONSOB and the Banca d'Italia.
The borsa's main indices are :
The FTSE MIB, a capitalisation-weighted index of 40 of the biggest companies
chosen to represent 10 economic sectors
The MIBTel, which covers all Italian shares (and certain foreign ones) listed on the
MTA and on the MTAX market.
Other indices include the MIDEX, ALL STARS and the now defunct MIB 30 index.
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HONG KONG STOCK EXCHANGE
The Hong Kong Stock Exchange (SEHK) is a stock exchange located in Hong Kong. It
is Asia's third largest stock exchange in terms of market capitalization behind the Tokyo
Stock Exchange and the Shanghai Stock Exchange, and the sixth largest in the world. As
of 30 November 2011, the Hong Kong Stock Exchange had 1,477 listed companies with
a combined market capitalization of HK$16.985 trillion. Hong Kong Exchanges and
Clearing is the holding company for the exchange.
Type Stock exchange
Location Victoria, Hong Kong, Hong Kong
Owner Hong Kong Exchanges and
Currency Hong Kong dollar
No. of listings 1,421
MarketCap HK$16.985 trillion (Nov 2011)
Indexes Hang Seng Index
The history of the securities exchange began formally in the late 19th century with the
first establishment in 1891, though informal securities exchanges are known to have been
in existence since 1861.
The exchange has predominantly been the main exchange for
Hong Kong despite co-existing with other exchanges at different points in time. After a
series of complex mergers and acquisitions, in the twenty first century, HKSE remains
the core. From 1947 to 1969 the exchange monopolised the Hong Kong market.
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The trading day consists of:
A pre-opening auction session from 9:00 am to 9:30 am. The opening price of a
security is reported shortly after 9:20 am.
A morning continuous trading session from 09:30 am to 12:00 pm
An extended morning session from 12:00 noon to 1:00 pm, also referred to as the
lunch break. Continuous trading proceeds in specifically-designated securities
(currently two ETFs, 4362 and 4363). Trading in other securities is not possible.
However, previously-placed orders in any securities can be cancelled from 1:00 pm
An afternoon continuous trading session from 1:00 pm to 4:00 pm
The closing price is reported as the median of five price snapshots taken from 3:59 to
4:00 pm every 15 seconds. In May 2008, the exchange also implemented a closing
auction session to run from 4:00 pm to 4:10 pm, with a similar pricing mechanism as the
opening auction; however, this resulted in significant fluctuations in the closing prices of
stocks and suspicions of market manipulation. Initially, the exchange proposed limiting
price fluctuations in the auction sessions to 2%; in the end, they removed the closing
session entirely in March 2009.
Up until 2011, trading hours comprised a pre-opening auction from 9:30 AM to 9:50 AM,
followed by continuous trading from 10:00 AM to 12:30 PM and 2:30 PM to 4:00 PM.
The two-hour lunch break between the morning and afternoon sessions was the longest
among the world's 20 major stock exchanges. A 2003 proposal to shorten the lunch break
failed due to opposition from brokers. Another plan to shorten the lunch break to one
hour was floated by the exchange in 2010; the morning session would then start earlier,
run from 9:30 am to 12:00 pm, and the afternoon session from 1:00 pm to 4:00 pm,
leaving the closing time the same as before. Justifications included bringing hours into
line with China. Reactions from both brokers and the restaurant industry were mixed.
On 7 March 2011, the exchange extended its hours in the first of two phases. The
morning session now runs from 9:30 am to 12:00 noon, followed by a ninety minute
lunch break, and an afternoon session from 1:30 pm to 4:00 pm. Index futures and
options now begin trading at 9:15 am, thirty minutes earlier than before, and close at the
same time as before, 4:15 pm. On 5 March 2012, the lunch break will be cut to sixty
minutes, with the afternoon session running from 1:00 pm to 4:00 pm.
The exchange first introduced a computer-assisted trading system on 2 April 1986. In
1993 the exchange launched the "Automatic Order Matching and Execution System"
(AMS), which was replaced by the third generation system (AMS/3) in October 2000.
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David Webb, independent non-executive director of the Exchange since 2003, has been
arguing for a super regulatory authority to assume that role as regulator, as there is
inherent conflict between its commercial and regulatory roles. In the meantime, he argues
for improved investor representation on the Hong Kong Stock Exchange.
In 2007, the uproar by smaller local stockbrokers over the decision by board of directors
to cut minimum trading spreads for equities and warrants trading at between 25 HK cents
and HK$2 caused the new board to vote to reverse the decision. The reforms were to be
implemented in the first quarter, but was put back on the table following protests by
brokers. Webb criticised the board for caving in to vested interests.
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In this project I would like to conclude my topic on international stock exchange that it
has become the important segment of the world in the financial market so that it creates a
liquidity. Thus, It is important for every country to have an efficient stock exchange for
economic development of the country.
K.E.S. SHROFF COLLEGE Page 43
GCM text book of vipul prakashan