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What
is the Stock Market?
The
Australian Stock Exchange
So what is the stock
market and what are shares?
The stock market is
where the buying and selling of company shares takes
place. In Australia, these transactions take place
through the Australian Stock Exchange, or ASX as it is
known. It was formed in 1987 by amalgamating the six
capital city stock exchanges. The amalgamation was
necessary because of financial deregulation and the
accompanying increase in international transactions.
Before 1987, most of the
action took place on the floor of the stock exchanges.
Transactions were shouted, prices were chalked up on a
board, in fact, to most of us, it seemed as if there was
little order to the goings-on. However, the ASX
introduced the Stock Exchange Automated Trading System
(SEATS), which by 1990 had taken over all transactions.
SEATS allows trading to be conducted through a computer
system. Transactions are processed in the order in which
they are made and the system links buyers and sellers.
It may not match the drama of the past but it is far
more efficient.
S&P/ASX 200 Composite Index
The state of the stock
market is judged by the S&P/ASX 200 Composite Index,
which recently replaced the All Ordinaries Index,
formerly known as the All Ords.
The S&P/ASX 200
Composite Index is a measure of 200 of the largest and
most frequently traded stocks on the Australian share
market. Measuring their rise and fall allows us to have
a fairly accurate reading of how the Australian market
as a whole is faring. The American equivalent of the
S&P/ASX 200 Composite Index is the Dow Jones Index.
Each major share market around the world has its own
index to help investors rate how the market is faring,
plus a number of sub indices such as an industrial
index, a gold index or a resources index, that measure
particular sectors.
Next:
What are Shares?
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