By: Blayne Paulsen & Ryan Good

Today, the FSE covers the complete process chain including securities and derivatives trading and clearing, transaction settlement, custody, the provision of market information, and development and operation of electronic trading systems.

Known as one of the oldest exchanges in the world. It dates back to an official exchange list, which provided 12 different currencies in 1625.

It is the largest of 8 banks in Germany. The success of this exchange hasn’t been primarily due to the

structuring of the company, but it was one of the first exchanges to go electronic. It began processing some of its data electronically in 1969.

In 1997 the FSE launched Xetra, a fully electronic system. Which has made the exchange floor obsolete.

Eurex: Market leader in trading and settlement of futures/options on shares, indices, ETFs and money market products.

The London Stock Exchange is one of the World’s largest stock exchanges. It deals in over 2800 domestic listed and 460 international companies.

Its heritage dates back to 1698 when stock dealers were expelled from the royal exchange for “rowdiness.” They began selling and trading in the streets and coffee shops.

1801 marked the date the first regulated exchange came to existence in London. (Now known as the LSE)

“Big Bang” In 1997, the exchange made the move to an electronic

system called SETS (Stock Exchange Electronic Trading Service). Created more efficiency to the exchange.

Extranex

Established in 1792 with the Buttonwood Tree Agreement. Railroad companies dominated the exchange through the 1800’s. The NYSE’s first centralized location was a room rented for $200

a month at 40 Wall Street in 1817 (Burnt down in the Great Fire of New York).

Bruno Des Forges becomes first non-US member on Exchange in 1976.

1977 NYSE allows foreign brokers/dealers membership on the floor.

1979 modernization of trading floor. 1997 wireless data system inaugurated on trading floor, allowing

brokers to receive orders, access market information and transmit execution reports from any location on the trading floor.

Today the NYSE is a major player in international trade, the capital market flow is generated from over 2805 domestic listed and 421 international companies.

Name Total Number of Listed Companies

Total number of Listed Foreign Companies

Proportion

NYSE 2805 421 15%

NASDAQ 3200 335 10.5%

London Stock Exchange

2800 430 15.4%

Singapore Stock Exchange

728 268 36.8%

Tokyo Stock Exchange

2416 25 1%

Hong Kong Stock Exchange

1220 396 32.5%

Total 13169 1875 14.2%

Ownership of member firms by an outside corporation is allowed.

Abolition of the distinction between stockjobbers and stockbrokers.

Move from an open-outcry system to an electronic, screen based trading system.

Deregulation of financial markets.

Why all of the regulation change?Did new system improve the exchange?

Each of these exchanges are publically traded.

FSE owned by Deutche Boerse GroupLSE owned by London Stock Exchange GroupExchange competition- MergersNYSE & Euronext

China

Why merge with Europe?

There are international exchanges located around the world. http://www.bloomberg.com/markets/stocks/wei_region2.

html

Why is there not an international exchange in Africa?

Is this due to development?Does it effect their economy?

Hong Kong: A Product of What?Opium Wars of mid 1800’sFrank Lucas Must Be Jealous

1842 199716.5% Corporate Tax2008: $27K/ PC GDP

05000

100001500020000250003000035000

MKT Cap of HSI 1986 -2009

Adj Close

Equity Market: HKEXGov./Fixed/CommoditiesIPO Leader

0

1000

2000

3000

4000

5000

6000

7000

1/4/2005 1/4/2006 1/4/2007 1/4/2008 1/4/2009

MKT Cap of SSE 2005 - 2009

Adj Close

Democracy Vs. CommunismOne Country, Two SystemsBoth Are Effectively CapitalistHK = 70% Mainland Trading

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5,000,000,000,000

10,000,000,000,000

15,000,000,000,000

20,000,000,000,000

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1/3/2005 1/3/2006 1/3/2007 1/3/2008 1/3/2009

MKT Cap (HKD) of HKEx 2005 - 2009

Total market capitalisation (HKD)

Float Disparity

Hang Seng Index: NOT a Stock Exchange HKEX formed in 1891 Similar to NYSE/SuperDot Ease of Listing Leader (top 5) in IPOs “H” Shares & Red Chips

1285 Companies (PRC + HK) $ 11.57 Trillion HKD

($ 1.5 Trillion USD)

June 1 2001 Restrictions Lifted: Now: Prior: Spot exchange deposits

and foreign currency cash deposits

Shenzhen Stock Exchange: SSECreated 1990540 listed companies, Small to Medium$1.7 Trillion USDTraded in Hong Kong Dollars

Shanghai Stock Exchange: SSE (yes… the same)Created in 1990860 listed Companies, Medium to Large$3.77 trillion USDTraded in US Dollars

Premiums on H SharesSupply/Demand FunctionNo Arbitrage ChannelWhat about hedge funds?

Meanwhile in China…B Share DiscountWhy?

Higher LiquidityWhy…………?

Transfer of Power to Mainland WTO Impact China’s Growing Wealth (>$2 Trillion USD) Translation of Growth to Equity Markets A/B Shares

Auction timing Premiums for Intl. Investors Loyalist Party Benefits

H Shares/Red Chips Dual Listings

China’s Control on the Markets What’s the Big Deal?

SEC vs. SFC Vs. CSRC

Blayne PaulsenFrankfurt Stock ExchangeLondon Stock ExchangeNew York Stock Exchange

Comparisons

Ryan GoodHong Kong Stock ExchangeShanghai Stock ExchangeShenzhen Stock Exchange

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