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Guide to the Australian Securities Exchange (ASX)

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Last editedJune 20213 min read

If you’re thinking about building your investment portfolio, you’ve probably started keeping an eye on the Australian Securities Exchange (ASX). So, what is ASX exactly, and how does it work? Find out how to buy shares on ASX in our guide to investing.

What is ASX?

The Sydney Futures Exchange and Australian Stock Exchange merged in July 2006 to form the Australian Securities Exchange, or ASX. It’s one of the world’s top exchange groups, including markets for a wide variety of asset classes. You can buy and sell assets like equities, commodities, and energy. The ASX also helps facilitate payments systems and ensures all listed companies adhere to its corporate standards.

Australian Securities Exchange ASX operations include:

  • Trading services

  • Derivatives markets

  • OTC markets

  • Corporate listings services

These types of operations are heavily regulated for compliance by the Australian Securities and Investments Commission (ASIC) as well as the Reserve Bank of Australia.

Should you invest in the Australian Securities Exchange ASX?

If you’re interested in purchasing shares in Australian companies, you’ll need to learn how to invest in ASX. The Australian Securities Exchange is Australia’s largest, holding over 2,000 companies with over $2 trillion AUD in market capitalisation.

The exchange’s markets also tend to produce slow but steady returns. For example, the S&P/ASX 200 Index has recently produced annualised returns of 10%, apart from the recent Covid-influenced fluctuations. This makes it a good choice for long-term investments, as $1,000 invested now could be worth $45,000 in 40 years.

How to buy shares on ASX

Ready to get started? Here’s how to buy shares on ASX:

Step 1: Select a broker

All ASX financial products are traded electronically. To buy shares, you’ll need to set up a trading account with an ASX broker, either online or through a full-service provider. Non-advisory online brokers are fine for those who are confident with their market knowledge, but if you’re new to the ASX it might be worth paying slightly higher fees for an adviser.

  • Full-service brokers: make recommendations, conduct research, and provide trading advice. They can put together a tailored investment plan for your needs. If you want to purchase futures, warrants, and options, you can also choose an accredited adviser.

  • Online brokers: facilitate the buying and selling of securities without any recommendations. Brokerage fees are lower as a result and this works for traders who know what they want without input.

Step 2: Place an order

After selecting your broker and setting up your trading account, you’re ready to place your first order. You’ll need to select how many securities you wish to buy or sell, notifying your broker. The broker will then enter the order into the electronic ASX platform. This electronic network gets to work matching buy and sell orders, looking at price and sequence.

Step 3: Receive trading confirmation

A primary function of the ASX is to match buy orders with sell orders. Once your order has found its match in the ASX system, the trade takes place. You’ll receive a confirmation when this happens, at which time you’ll need to pay for your securities. Payment must take place within two days of the order.

Types of securities for sale

The Australian Securities Exchange serves as a one-stop shop for investors, offering a variety of different shares and options. In many cases, investors are looking for Fully Paid Ordinary or FPO shares in individual companies. Yet you can also work with your broker to invest in the following:

  • Options: Buyers have the option to purchase a share at a specified price and date.

  • Managed Funds: Exchange Traded Funds and Managed Funds offer ways to invest in the market at lower risk than with individual shares. Funds include a full packet of shares to enrich your portfolio.

  • Index Funds: Another type of fund to invest in is an Index Fund, which tracks the movement of an entire index like the S&P/ASX 200.

  • Capital Raising: When a listed company issues additional shares to its current shareholders to raise funds, this is called capital raising. You can potentially snap up additional shares at a discount.

These are just a few examples of what you can trade on the ASX.

When does ASX trading take place?

The ASX is open for trading between 10am and 4pm, Monday through Friday. The market is considered in a ‘pre-open’ status between 7am and 10am, during which time trades can be entered into the ASX system. They’re queued up in order and price. It’s worth getting your order in early, because the trades entered first will be given priority once the ASX opens for the day at 10am.

Learning how to trade on the ASX might seem daunting, but a broker can help you get started. And with a combination of shares, commodities, and funds, you’ll have plenty of options to choose from. 

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