Aussie brokers offer direct link to US markets

ASX World Link service highlights the trend towards global equity trading with settlement in domestic currencies.

The Australian Stock Exchange’s (ASX's) ambitious plan to offer investors access to the major global centres for equity trading has taken its first step, with participating brokers offering clients direct access to the US marketplace via the Bloomberg Tradebook brokerage platform.

The ASX World Link gives brokers and their clients access to trade entry, confirmation, settlement and registry services via the same infrastructure used to transact in Australian stocks.

The initial service provides a one-way link from Australia to Nasdaq and the New York Stock Exchange (NYSE). The Nasdaq and NYSE securities available have been chosen on the basis of criteria including index membership, liquidity and market capital.

The ASX expects to follow US securities trading with a reciprocal trading link with the Singapore Exchange (SGX) that will be available later in 2001. Links to other overseas markets will be established in the future.

International securities that an investor buys through the ASX World Link service are held by an ASX entity in the overseas market, as custodian, on the investor’s behalf. Records of stock ownership can be requested through the same channels as for Australian stocks.

Investors also bear a certain amount of foreign exchange risk, as initially foreign exchange transactions will be carried out “no later than the end of the foreign market trading day on which the investor has placed an order,” according to the ASX.

As retail investors, particularly those that have embraced the online channel, seek global diversification in their portfolios, stock exchanges are increasingly seeking cross-border agreements to help boost liquidity of their listed stocks.

Unlike the listing of seven Nasdaq stocks last year as part of a Hong Kong Stock Exchange pilot program, foreign stocks aren’t listed or traded on the Australian exchange. Instead, the Bloomberg ECN is used to route orders directly to the US markets.

Nasdaq Japan, which plans to open its International Section in April, with trading scheduled for June, and Nasdaq Europe are following a dual listing model like that used in Hong Kong.