Regulatory Frameworks of the Equity Markets of Australia and the USA Essay

Regulatory Frameworks of the Equity Markets of Australia and the USA - render ExampleThe structure of organized exchanges and the trading policies imposed by regulatory bodies continue to influence the turnover rate of physical shargons, price formation of equities and trading costs, while generally exerting pressure on the behavior of trade participants and the overall competitiveness of securities markets. This report will discuss the structures and regulatory frameworks of the justness markets of Australia and the United States of America. As a reference point, the major exchanges in both countries will be compared, where the big board is used as the benchmark for the exchange activities of ASX and Nasdaq. Also, the report will include a rundown of equity-funding alternatives for a listed US corporation, as required. The equity market of Australia is operated largely by its organized stock exchange, the Australian Stock give-and-take (ASX). Trade of ASX stocks takes line on a fully competitive and automated order-driven trading system, known as the Stock Exchange Automated Trading System (SEATS) (Elvis Jarnecic, June 1999). Trading is facilitated through with(predicate) and through the placement of a purchase order by a market participant with a broker, either by way of telephone or online through the internet, on regular trading days. In contrast, the New York Stock Exchange or NYSE operates downstairs a hybrid market structure. Kaj Hedvall (CEFA, 2006) defines hybrid markets as a specialists market and the NYSE as an order-driven, floor- found, straight market with specialists. Also known as an auction market these specialists converge on the floor of NYSE to facilitate the reporting of bids and carrys, execute the trade and maintain order on the floor. NASDAQ, on the other hand, is a quote-driven, dealer market. At present, there are over 500 dealers-also called market-makers, composed of large investment companies, who buys and sells shares of stocks through a personal inventory of NASDAQ-listed stocks to earn a profit from a regulated bid/ask spread. NASDAQ is the largest screen-based market in the United States. Screen-based means that there is no physical location, but trading is based on computers and other communication mediums (Block, S et al, 2002). Thus, NASDAQ market makers conduct the exchange not through a physical trading floor, but by way of an electronic network. While each security chthonic Nasdaq has an average of 14 market makers competing against each other, only one specialist is designated to every NYSE-listed stock. It can be observed that Australia operates a purely order-driven market while the major exchanges of the USA, conduct trading in a purely quote-driven market for NASDAQ and a cross between the two pure market models, the hybrid market, a structure of the NYSE. The advantage of an order-driven market is the inherent transparency of the system since all buy and sell orders of participants are posted on the market, providing information on which prices investors are willing to buy or sell shares. This is not an attribute of a quote-driven market where only the bid and ask offers of market makers are displayed.