A Comparative Study of Japan Exchange Group andAustralian Securities Exchange from 2011 to 2015

Sho YAMAUCHI: s2142054

January, 2017

List of Abbreviations and Acronyms

List of Abbreviations

APA......American Psychological Association

ASD......Australian Dollar

ASX......Australian Securities Exchange

ETF......Exchange Traded Fund

ETN......Exchange Traded note

ETP......Exchange Traded Product

FY......Financial Year

IPO......Initial Public Offering

JPX......Japan Exchange Group

JPY......Japanese Yen

NKY......Nikkei-225 Stock Average

OTC......Over-the-counter

USD......United States Dollar

WFE......World Federation of Exchanges

WWII......World War II

List of Acronyms

JASDAQ......Japan Securities Dealers Association automated Quotation

Table of Contents

1. Chapter 1: Introduction 3

1.1 Background and Introduction 3

1.1.1 Introduction 3

1.1.2 Background of JPX..............................................................................................3

1.1.3 Background of ASX............................................................................................3

1.1.4 Definition of terms...............................................................................................4

1.2 Research statement and Questions 4

1.3 Research Framework..................................................................................................4

1.4 Importance of Research..............................................................................................5

1.4.1 Interdisciplinary nature........................................................................................6

1.5 Methodology...............................................................................................................6

1.6 Literature Sources.......................................................................................................7

1.6.1 Primary sources 7

1.6.2 Secondary sources...............................................................................................7

1.6.3 Social commentary sources.................................................................................7

1.7 Ethical Considerations................................................................................................8

1.7.1 Plagiarism............................................................................................................8

1.7.2 Bias......................................................................................................................8

1.7.3 Reliability............................................................................................................8

1.7.4 Validity................................................................................................................9

2. Chapter 2: Organisational differences between JPX and ASX................................10

2.1 Organisational structure............................................................................................10

2.1.1 JPX....................................................................................................................10

2.1.2 ASX...................................................................................................................11

1. Chapter 1

1.1 Background and Introduction

1.1.1 Introduction Today, organisations called ‘stock exchanges’ or ‘securities exchanges’ have some important

roles, especially for businesses. WebFinance Inc. (2017a, ¶1) defines a stock exchange as an

organised and regulated financial market where securities such as shares and bonds “are

bought and sold at prices governed by the forces of demand and supply.” The roles of stock

exchanges include measuring the economic condition of a company but also of a country and

making it easy for businesses and investors to convert investments into cash. Desjardins

(2016, ¶1) explains there are 60 major stock exchanges in the world with a total value of

USD 69 trillion dollars. This report will compare two stock exchanges in the Asian Pacific

market: the Japan Exchange Group (JPX), ranked 4th in the world, and the Australian

Securities Exchange (ASX), ranked 15th. In order to do this, the researcher will use data of

Domestic Market Capitalization from April, 2015 and will specifically evaluate the data from

2011 to 2015 (Market Index, 2017).

1.1.2 Background of JPX In Japan, the first two stock exchanges were founded in Tokyo and Osaka in 1878 under

Stock Exchange Regulation. However, these two stock exchanges were forced to close during

World War II (WWII). After the end of WWII, in 1948, the Securities and Exchange Act was

implemented. Financial Services Agency (2017) describes that this law was amended and

renamed Financial Instruments and Exchange Act in June 2006. As a result, this established

an additional seven stock exchanges: Nagoya, Kyoto, Kobe, Hiroshima, Fukuoka, Niigata,

and Sapporo (Financial Services Agency, n.d.). In October 1967, the Kobe Stock Exchange

dissolved. The Tokyo Stock Exchange absorbed the Hiroshima and Niigata Stock Exchanges

in 2000 and the following year, the Osaka Stock Exchange absorbed the Kyoto Stock

Exchange. Eventually, JPX was formed in 2013 and includes Tokyo and Osaka stock

exchanges, as well as the remaining exchanges of Nagoya, Sapporo, and Fukuoka (Japan

Exchange Group, 2016a, p.5).

1.1.3 Background of ASX The history of the Australian Stock Exchange is older than the Japan Exchange Group.

Market Index (2017) explains the first Australian stock exchange was founded in Melbourne,

Australia in 1861. The second stock exchange was established in Sydney ten years later. After

that, four regional stock exchanges were established in Hobart in 1872, Brisbane in 1884,

Adelaide in 1887, and Perth in 1889. ASX Limited (2017a) states that the Australian Stock

Exchange was set up on 1 April 1987 by integrating these six stock exchanges. Finally, the

Australian Securities Exchange was formed in 2006 by merging with Sydney Futures

Exchange.

1.1.4 Definition of terms This research will compare two stock exchanges in terms of structure, liquidity, and

performance. Investopedia, LLC (2017a, ¶1) defines “liquidity as the degree to which an

asset or security can be quickly bought or sold in the market without affecting the asset's

price.” Also, financial performance indicates profit and market capitalisation. Investopedia,

LLC (2017b, ¶1) defines “market capitalization as the total dollar market value of a

company's outstanding shares.” Moreover, it is necessary for readers to know what a listed

company is. WebFinance Inc. (2017b, ¶1) defines a listed company as “a firm whose shares

are listed (quoted) on a stock exchange for public trading.”

1.2 Research statement and Questions This research will compare JPX with ASX, from 2011 to 2015, in order to identify how

structure, functions, liquidity, and performance created the gap between them even though

these exchanges were established within only 20 years of each other.

Question 1: What is the background of JPX and ASX?

Question 2: What are differences between JPX and ASX in the way each one organises its

market?

Question 3: What are the strengths and weaknesses of both stock exchanges?

Question 4: How can both stock exchanges be improved in the future?

1.3 Research Framework This interdisciplinary project consists of five chapters to answer four research questions and

present a conclusion.

Chapter 1 explores how JPX and ASX have been formed, by referring to primary sources,

which are made public in each website. Also, it introduces the ethical considerations which

will guide this research, which are plagiarism, bias, reliability, and validity as well as explain

the research method and sources used.

Chapter 2 will identify the ways each stock exchange has organized its market until now. In

order to do this, the researcher will refer to each of five annual reports from 2011 to 2015.

The aim is to focus on their organisational structure and functions because annual reports

mention not only sales and expenses records but also structure and functions. Also, the

sections shown on the home page of each stock exchange are very useful because it is

obvious what products are sold and what are the differences of regulations to become a listed

company.

Chapter 3 will find the strengths and weaknesses of both stock exchanges. It will take into

account the facts from Chapter 2 to answer Research Question 3 because the differences in

organisational structure and functions can be one of the factors affecting their weaknesses and

strengths. Also, it will consider the section of transaction levels and statistics in the annual

reports because it shows the records about listing businesses and the trend of cash. The

researcher will show some diagrams based on the information to make it easier for readers to

understand.

Chapter 4 will suggest how each stock exchange can take advantage of its strengths and how

each can overcome its weaknesses to improve in the future. In other words, this chapter will

draw on the ideas from previous chapters. The discussion will consider the influence of

politics, business, and finance. The researcher will collect this information from news,

business journals, and other trustworthy organisations.

Chapter 5 will give conclusions to the research questions. In other words, it will not present

any new ideas, but it will show the answer for research questions clearly. Also, it is easy for

readers who do not have enough time to read this whole report to generally understand what

it was discussing.

1.4 Importance of Research This research is different from other studies in the same field. First, it explains

comprehensively what a stock exchange is with definition and how it works. For this reason,

this research will give benefits to those who are not familiar with this financial industry

because such people can understand what this research discusses and expand their

knowledge. Also, this research will analyze two major stock exchanges in the world to

compare them. Therefore, those who research similar topics can get some tips.

1.4.1 Interdisciplinary natureThe project will be interdisciplinary by politics, business, and finance.

Politics

When people recognized the new president of the United States on November 9 th 2016, there

was a sharp decline from 17,171.38 on the preceding day to 16,251.54 on the day in the

indicator of stock prices for Nikkei 225 in accordance with the chart of Bloomberg L.P.

(2016). This research will therefore deal with the presidential election.

Business

It is essential for businesses to become a listed company in order to get a fund. Each

country’s stock exchange offers different tough requirements such as the amount of profit and

the number of shareholders, so investors can regard the businesses which met the

requirements as reliable and stable. Thus, the businesses can gain attention from investors for

trade. This research will therefore deal with the listing requirements.

Finance

This research is firstly involved with the discipline of finance as it deals with the financial

market.

1.5 Methodology The research will be carried out based on secondary research because referring to the

completed data and experts’ opinions is the most effective method to compare two things

especially for the performance of organizations in business. Also, the research will be

strongly connected with numbers because it gets easier for readers to see the gap of JPX and

ASX by showing tangible evidence. For this reason, quantitative sources should be helpful

for this research. To collect credible information, the sources can be from annual report,

libraries, business journals and other trustworthy organizations such as government and the

stock exchanges themselves.

1.6 Literature Sources

1.6.1 Primary sources University of Illinois (2006, p.1) defines primary sources as “those which provide first-hand

accounts of the events being researched. In general, these are documents that were created by

[those who witnessed or participated in] these events at about the time they occurred, and

include diaries, letters, reports, photographs, creative works, financial records, memos”, and

stock exchange pages. An example of a primary source used in this study is the website,

called Nikkei-225 Stock Average (NKY) quote – Nikkei 225 index – Bloomberg markets by

Bloomberg L.P. (2016). It is a very useful source because it has comprehensive information

including line graphs showing the volume of Nikkei 225 using selected time frames and the

best/worst ten performers and their names. In addition, the information is presented clearly

and it is much easier for the researcher to read the volume and percentage of return.

1.6.2 Secondary sources Virginia Polytechnic Institute and State University (2016, ¶3) defines secondary sources as

“those made by analyzing, reviewing, or summarizing based on the information of primary

resources or other secondary resources. Even sources presenting facts or descriptions about

events are secondary unless they are based on direct participation or observation. Moreover,

secondary sources often rely on other secondary sources and standard disciplinary methods to

reach results, and they provide the principle sources of analysis about primary sources.” An

example of secondary source is the website, called All of the world’s stock exchanges by size

by Desjardins (2016). The reason why this is a secondary source is that the author mentions is

based on the data from the World Federation of Exchanges monthly report from November

2015 at all. In other words, he gives his analysis to readers after referring to the trustworthy

primary source.

1.6.3 Social commentary sources World Public Library (2016, ¶1) defines “social commentary as the act of using rhetorical

means to provide commentary on issues in a society. This is often done with the idea of

implementing or promoting change by informing the general people about a given problem

and appealing to people's sense of justice. Social commentary can be practiced through all

forms of communication, from printed form, to conversations to computerized

communication.” An example of a social commentary source is the website, called Australian

stockmarket’s worst return since 2011 as ASX 200 gains 1.1pc. by Rogers (2015). The reason

why this is a social commentary source is The Weekend Australian is a news media, and

Rogers writes his article as a journalist. According to the article, the Australian share market

has turned in its worst annual performance in three years. Since this article was uploaded on

January 1 in 2015, it indicates the worst performance in 2014. 1.1 per cent is the smallest gain

since 2011, so there is a room for further discussion to analyze why the result was brought

about and whether it was solved by 2015.

1.7 Ethical Considerations

1.7.1 Plagiarism Robson (2014, p.137) defines plagiarism as “the passing off of someone else’s work as your

own.” This research will use quantitative data to compare each liquidity and performance,

and qualitative data to analyze each organisational structure and functions from mainly their

annual reports. Therefore, it is necessary for the research to respect their achievement. In

order to avoid plagiarizing, the researcher will use quotation marks if he will copy their

words without paraphrasing. Also, the researcher will identify where the sources come from

with APA (American Psychological Association) style.

1.7.2 Bias White (2017, ¶3) defines that “bias is a lack of objectivity or an inclination to favor one thing

or person over another.” This research is based on the annual reports from each stock

exchange, but this way can cause a bias. Therefore, it is important for this research to refer to

many sources because objectivity can be proved if these sources show same information.

1.7.3 Reliability Phelan & Wren (2005-6, ¶1) define reliability as “the degree to which an assessment tool

produces stable and consistent results.” In terms of trustworthiness, the annual reports should

be reliable because credible organizations have produced them. Moreover, if other credible

organizations show the same results, the fact testifies to the reliability of information.

1.7.4 Validity Robson (2014, p.56) defines that “validity refers to whether or not something actually

measures what it claims to measure.” In carrying out this research, it is sometimes hard to

interpret the data with terminology so it may cause a lack of validity. In order to prevent this,

the researcher will have meetings with one of his supervisors who is familiar with this topic

frequently and have him check to make sure this report discusses issues logically.

2. Chapter 2: Organisational differences between JPX and ASX The success of a stock exchange depends on its organisational structure and functions. This

chapter will focus on these aspects in order to analyze the differences between JPX and ASX

in the way each one organises its markets. The chapter is divided into three parts. The first

part of the chapter identifies how many markets each stock exchange has and analyzes their

purpose. The second part clarifies how each set of requirements for listing on the markets

works as one of the functions. The final part of the chapter explores the financial instruments

the investors of each stock exchange invest in. The researcher will do this by using the

relationship between each stock exchange and its listed companies as an example.

2.1 Organisational structure JPX and ASX differ in their organisational structures. This section discusses how many

markets each of these stock exchanges has and what kind of concepts the markets have, in

order to analyze the scale of markets before highlighting the differences between them.

2.1.1 JPX JPX has three markets for a company to be listed on. They are broadly classified into two

emerging markets: Market of the high-growth and emerging stocks (Mothers) and Japan

Securities Dealers Association automated Quotation (JASDAQ), and the Main Market which

is the largest and most established and consists of the Second Section and First Section. (see

Figure 1)

Source: Adapted from Japan Exchange Group, Inc., 2016b; ¶1

Figure 1: This figure shows JPX’s three markets which businesses can get listed on.

Kinds of Market JPX Has

Each of the three markets has a different concept. Japan Exchange Group, Inc. (2016b, ¶3)

explains that Mothers puts emphasis on the growth potential of businesses in terms of

eligibility requirements. Also, Japan Exchange Group, Inc. (2016b, ¶4) defines “JASDAQ as

a market characterized by the three concepts of reliability, innovativeness, and

regionalism and internationalism as its concept”, and consists of JASDAQ Standard and

JASDAQ Growth. JASDAQ Growth focuses on growth potential, whereas JASDAQ

Standard is all about stability. Moreover, Main Market focuses on corporate continuity and

profitability, but “the First Section is especially recognized as one of the top rank markets in

terms of its size and liquidity” (Japan Exchange Group, Inc., 2016b, ¶2).

2.1.2 ASX ASX has also three main markets for companies to be listed: ASX Listing, ASX Debt

Listing, and ASX Foreign Exempt Listing. (see Table 1)

Table 1: This table explains ASX has three categories for listing.

___________________________________________________________________________

___________________________________________________________________________Source: ASX Limited, 2016; p.101

ASX Listing is general and it is designed for companies domiciled in Australia. Also, ASX

Debt Listing is for a company which aim to only issue ‘bonds’. Investopedia, LLC (2017c)

defines bonds as “a debt investment in which an investor loans money to an entity (typically

corporate or governmental) which borrows the funds for a defined period of time at a variable

or fixed interest rate.” In addition, ASX Foreign Exempt Listing means that “an entity

admitted as an ASX Foreign Exempt Listing is required to comply with the rules of its

overseas home exchange and to release information to ASX that is released to its overseas

Kinds of Market ASX HasCategory of Listing Target

ASX Listing Ordinary Companies

ASX Debt Listing Companies which aim to only issue bonds

ASX Foreign Exempt Listing Companies listed on a foreign stock exchange*

*stock exchanges joining World Federation of Exchanges (WFE)

home exchange” (ASX Limited, 2016, p.101). In other words, ASX Foreign Exempt is

intended for a company whether Australian or international which is listed on a foreign stock

exchange joining WFE.

2.1.3 Comparison between organisational structure of JPX and ASX A comparison can now be made regarding of the organisational structures of JPX and ASX

by using the listed information in sections 2.1.1 and 2.1.2. JPX is more attractive for

businesses in terms of the number of markets. That is because they can choose from one of

these markets which fits their conditions if there are a variety of markets. JPX does not set

only a trustworthy market for investment like Main Market but also an apparently uncertain

market like emerging markets. Also, JPX sets a step by step approach to get listed on

emerging markets including Mothers and JASDAQ. That is because Mothers allow

businesses to become listed even if they have losses and bonds at initial public offering (IPO)

but pass other criteria while JASDAQ Growth allows businesses to be listed if they do not

have a deficit during a quarter before the application period. Therefore, JPX is very attractive

for domestic companies. However, ASX might be more attractive for some businesses to get

listed in rather than JPX. That is because JPX does not have a market involved with foreign

stock exchanges, but ASX has ASX Foreign Exempt Listing designed for companies listed on

a foreign stock exchange to be able to join WFE. For this reason, ASX supports domestic

companies who have expanded their business overseas.

2.2 Function: requirements for listing on the market This section examines each criterion a company has to meet to become listed on either JPX

or ASX, in order to clarify what each of these stock exchanges prioritizes.

2.2.1 JPX A company typically aims to become listed first on Mothers and/or JASDAQ, and then on

the Second Section and the First Section in turn (see Table 2). As discussed in 2.1.1, each of

the three markets has a different concept. Accordingly, each market sets a different level of

requirements for listing. First of all, Mothers requires a company to have more than 200

shareholders and 2,000 units of tradable shares. JASDAQ also requires a company to have

more than 200 shareholders, but a company does not need to have any tradable shares. In

addition, JASDAQ consists of JASDAQ Standard and JASDAQ Growth. The difference of

requirements for listing between these two markets is JASDAQ Standard requires a company

to have more than Japanese Yen (JPY) 200 million [United States Dollar (USD) 2 million],

but JASDAQ Growth permits listing of a company as long as it is not negative in terms of

shareholders’ equity. Then, the next market up is the main market, and the Second Section.

The Second Section sets easier admission criteria and tests to pass than the First Section. For

example, the admission criteria require a company to have more than 800 shareholders, 4,000

units of tradable shares, and JPY 2 billion (USD 20 million) of market capitalization as of the

listing day. On the other hand, the First Section presents the hardest 14 admission criteria and

a series of five tests to authorize a company to become listed (Japan Exchange Group, Inc.,

2012). For example, its admission criteria require a company to have more than 2,200

shareholders, 20,000 units of tradable shares, and JPY 25 billion (USD 250 million) of

market capitalization as of the listing day.

Table 2: This table explains what requirements for listing on each market in JPX presents.

___________________________________________________________________________

___________________________________________________________________________

Formal requirements

Source: Japan Exchange Group. Inc., 2015a; ¶1

2.2.2 ASX ASX has three markets for listing: ASX Listing, ASX Debt Listing, and ASX Foreign

Exempt Listing. However, all companies need to pass general requirements for listing on

ASX regardless of listing category (see Table 3). ASX Listing has three main listing

requirements to be met: there are meet 20 conditions, to pass either the profit test or the assets

test, and to submit an information memorandum. The 20 conditions include “having a

constitution which is consistent with the listing rules and be supported by at least 300 non-

affiliated security holders who holds a parcel of the main class of securities with a value of at

least Australian Dollar (ASD) 2,000” (ASX Limited, 2016, pp.102-103). Also, passing either

the profit test or assets test is one of the conditions. Specifically, the profit test is to examine

whether “the entity’s aggregated profit from continuing operations for the last three full

financial years [was] at least ASD 1 million, and the entity’s consolidated profit from

continuing operations for the 12 months to a date no more than two months before the date

the entity applied for admission must exceed ASD 500,000” (ASX Limited, 2016, p.106).

Moreover, assets test is to examine whether “an entity that is not an investment entity must

have ASD 4 million net tangible assets or ASD 15 million market capitalisation at the time of

admission” (ASX Limited, 2016, p.106). ASX Debt Listing also presents 12 conditions but it

does not require to take any tests because originally ASX Debt Listing is designed for the

businesses which get only authority to issue bond. Finally, ASX Foreign Exempt Listing

presents 12 conditions as well but it requires to pass either the profit test or assets test.

Concretely, the entity’s operating profit before income tax for each of the last 3 full financial

years must have been at least ASD 200 million, or an entity must have net tangible assets of

at least ASD 2,000 million or a market capitalisation of at least ASD 2,000 million (ASX

Limited, 2016, p.116).

Table 3: This table describes the general requirements to get listed on ASX.__________________________________________________________________________________

General requirements for listing on ASXAdmission Criteria General RequirementsNumber of Shareholders Minimum 300 non-affiliated investors @ A$2,000Free Float 20%

Company SizeProfit Test

A$1 million aggregated profit from continuing operations over past 3 years + A$500,000 consolidated profit from continuing operations over the last 12 months

Assets TestA$4 million net tangible assetsor A$15 million market capitalisation

___________________________________________________________________________Source: ASX Limited, 2017b; ¶1

2.2.3 Comparison between requirements of JPX and ASX A comparison can now be made regarding of the listing requirements of JPX and ASX by

using the listed information in sections 2.2.1 and 2.2.2. In comparing JPX with ASX, there

are two main points to consider in regards to the requirements of listing, which is one of the

functions. Firstly, the minimum number of shareholders which JPX requires is less than the

number ASX requires. Both stock exchanges have three main markets. However, each market

in JPX requires a different number of shareholders, which ranges from at least 200 to more

than 2,000, while all markets in ASX requires a company to have at least 300 shareholders.

Secondly, the minimum number of years of business operation which JPX requires is less

than the number ASX requires as well. Both stock exchanges require a company to operate

some years at the time of admission. For instance, JPX has both a market requiring more than

3 years of business operation and a market requiring more than 1 year of business operation.

On the other hand, all the markets in ASX require more than 3 years of business operation.

Therefore, it is better for both small and medium-sized companies, and large companies, to be

listed on JPX because JPX has a wider range of listing.

2.3 Financial instruments This section examines each set of financial instruments for an investor to buy and sell, in

order to explore how each stock exchange operates and gets profit. WebFinance, Inc (2017c)

defined financial instruments as “a document that has a monetary value or represents a legally

enforceable agreement between two or more parties regarding a right to payment of money.”

In fact, listing can be one of the financial instruments for a stock exchange. As discussed in

the previous sections, a company typically aims to become listed and a stock exchange sets

requirements of listing on the market. Basically, the reason why a company aims to get listed

is to collect funds for its operation from investors by selling their shares as a financial

instrument. However, it is uneasy for investors to invest in companies which have potential

for bankruptcy due to financial difficulty because their shares can lose all value. For this

reason, stock exchanges such as JPX and ASX set a reliable market like main market for

Japan and ASX Listing for Australia consisting of listed companies recognised enough for

their corporate continuity and profitability. Therefore, stock exchanges and companies can

regard listing as a viable financial instrument.

2.3.1 JPX Shares are an important financial instrument. In fact, JPX has 20 kinds of products in total.

13 out of 20 products are categorised as equities and remaining 7 products are derivatives

(see Table 4).

Table 4: This table shows all the financial instruments which JPX has.

___________________________________________________________________________

All the financial instruments which JPX hasEquities domestic stocks, foreign stocks, Exchange Traded Fund (ETFs), Exchange

Traded Note (ETNs), Real Estate Investment Trust (REITs), venture funds,

country funds, infrastructure funds, preferred stocks, etc., Japanese

government bonds, convertible bonds, subscription warrant securities, and

preferred equity investment securities

Derivative

s

Japanese indices, overseas indices, dividends indices, volatility indices,

REIT indices, bond, and individual security

___________________________________________________________________________Sources: Japan Exchange Group, 2017a; p.1 and 2017b; p.1

Compared to ASX, JPX has three characteristic financial instruments. The first different

instrument is venture funds. They are intended for investment corporations which regard

privately held companies as investment outlet. The second instrument is country funds. They

are dealt with by investors in order to invest in a particular country or area. The third

instrument is infrastructure funds. They focus on infrastructure such as solar facility and

harbor facility for investment. All of these instruments in Table 4 contribute to the trading

services revenue. Total operating revenue is 46% which means JPY 48.6 billion (see Figure

2). Also, cash equities occupy 71.4% of total trading services revenue while derivatives

occupy 28.6% of that in details (see Table 5).

Composition of Operating Revenue in FY 2014

Source: Adapted from Japan Exchange Group, Inc., 2015b; p.7

Figure 2. This doughnut chart illustrates JPX’s operating revenue in financial year (FY) 2014

is composed of five categories both in percentage and in billions of yen.

Table 5: This table explains a breakdown of trading services revenue in financial year 2014.

___________________________________________________________________________

A breakdown of trading services revenue in financial year 2014Subject Amount (Millions of yen) Ratio (%)

Trading Services Revenue 48,698(1)+(2)+(3)+(4)+(5)+(6) -

　Transaction Fees 40,221(1)+(2) -

　　Cash Equities 28,705(1) 71.4%

　　Derivatives 11,515(2) 28.6%

　Basic Fees 1,067(3) -

　Access Fees 4,730(4) -

　Facilities Usage Fees 2,600(5) -

　Others 79(6) -

___________________________________________________________________________Source: Japan Exchange Group, Inc., 2015b; p.66

2.3.2 ASX Compared to JPX, ASX has two characteristic financial instruments (see Table 6). The first

different instrument is hybrid securities. ASX Limited (2017c, ¶1) explains “Hybrid securities

typically promise to pay a rate of return (fixed or floating) until a certain date, in the same

way debt securities do. However, they also have equity-like features that can mean they may

provide a higher rate of return than regular debt securities.” The second instrument is grains

derivatives. Australian Trade and Investment Commission (2017, ¶1) states “Australia is the

Composition of Operating Revenue in FY 2014

sixth largest country by total area and also known as an agricultural country because 60

percent of national land is used for agriculture and 60 percent of production is exported to

other countries.” From this background, ASX has grains derivatives which other stock

exchanges do not have.

Table 6: This table shows all the financial instruments which ASX has.

___________________________________________________________________________

All the financial instruments which ASX hasCash market shares, indices, bonds, hybrid securities, ETFs and other

Exchange Traded Product (ETPs), managed funds, and warrants

Derivatives and

over-the-counter

(OTC)

options, index derivatives, interest rate derivatives, grains

derivatives, and energy derivatives

___________________________________________________________________________Source: ASX Limited, 2017d; p.1

Cash market in Table 6 contributes to 5% of total operating revenues while derivatives and

OTC market contributes to 32% of them (see Figure 3).

24%

5%

7%

6%32%

10%

8%

6% 2%Operating revenues mix

Listings and Issuer ServicesCash Market TradingCash Market ClearingCash Market SettlementDerivatives and OTC MarketsInformation ServicesTechnical ServicesAustraclearOther revenue

ASD 658.3 mil-lion

Source: Adapted from ASX Limited, 2014; p.1

Figure 3. This doughnut chart illustrates ASX’s composition of operating revenue in financial

year 2014.

2.3.3 Comparison between the financial instruments of JPX and ASX A comparison can now be made regarding of the financial instruments of JPX and ASX by

using the listed information in sections 2.3.1 and 2.3.2. JPX puts emphasis on funds while

ASX puts emphasis on derivatives. In comparing JPX with ASX, JPX has three characteristic

financial instruments: venture funds, country funds, and infrastructure funds. On the other

hand, ASX takes advantage of its competitive agriculture with other countries and

subsequently it has grains derivatives. In terms of operating revenues, it is obvious that JPX

focuses on equity, whereas ASX focuses on derivatives as Figures 2 and 3 show. That is, the

proportion of JPX’s operating revenue is 71.4% for cash equities and 28.6 % derivatives, but

the proportion of ASX’s operating revenue is 5% for cash market trading, and 32% for

derivatives and OTC market. However, surprisingly, investors deal with JPX’s derivatives

more than ASX’s derivatives (see Figure 4).

Source: Adapted from Japan Exchange Group, Inc., 2015b; p.13

Figure 4. This clustered bar illustrates how many billions of contracts stock exchanges have

carried out in terms of derivatives.

2.4 Chapter summary This chapter consisted of three parts: organisational structure in 2.1, requirements for listing

as a function in 2.2, and financial instruments in 2.3. The first part identified both JPX and

ASX have three markets and analyzed each focus on domestic and foreign aspects. The

second part clarified the level of JPX’s listing requirements is more extensive range than

ASX’s listing requirements. The final part explored JPX focuses on equity while ASX

focuses on derivatives, but the volume of contracts for derivatives in JPX is more than

ASX’s.

Derivatives Volume Rankings

References

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