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Chapter 19

STOCK MARKETS
AROUND THE
WORLD

Overview
Multiple listings on national markets
Trading costs in international stock
markets
Global Diversification
correlation of world equity markets

United Kingdom
London Stock Exchange (LSE)
ordinary shares of local and foreign firms
private fixed interest securities
British government securities

Operations
OTC market

Reforms
Big Bang

Germany
Frankfurt Stock Exchange (FSE)
Market Segments
official market
regulated market
Neuer Market

Exchange Electronic Trading (Xetra)

Japan
Tokyo Stock Exchange (TSE)
first section
second section

Operations
continuous auction market
OTC market

Reforms
financial big bang

Chinese Stock Market


A shares
restricted to Chinese
investors
denominated in
Chinese yuan
limited to stateowned companies

Hong Kong
H shares
red chips

B shares
reserved for foreign
investors
Shanghai B-shares
are quoted in U.S.
dollars
Shenzen B-shares
are quoted in Hong
Kong dollars

Recent European Stock


Market Reorganizations

London Stock Exchange


Deutsche Brse
Euronext
Other European Stock Market
Activities
NASDAQ
NYSE

New European Exchanges


Markets for Emerging Companies
Neuer Markt in Frankfurt
Nouveau Marche in Paris
Alternative Investment Market in London

Easdaq in Brussels

New Japanese Exchanges


NASDAQ Japan
auction market
small issues are traded through the
market making system
large issues are traded by the auction
method

Ownership and Control of


National Stock Exchanges
Privately Owned Markets
United States, United Kingdom, Hong
Kong, Canada, Japan, Australia

Public Institutions
France, Spain, Italy, Belgium

Banks
Switzerland, Austria

Trading Procedures and


Computerization
Continuous Market
Call Market
Computerized Trading

Dealers in Major Markets


Specialist System
Competitive Dealer System
Computerization

Stock Market Indexes


Japan
Tokyo Stock Price
Index (TOPIX)
Nikkei 225 Stock
Average

United Kingdom
Financial TimesStock Exchange
100 (FTSE 100)

Germany
Deutscher
Aktienindex (DAX)

France
CAC 40

Others
Hang Seng Index
Morgan Stanley
EAFE Index

Global Depository Receipt


Global Depository Receipt (GDR)
Bank-issued title to shares of stock traded in
a foreign country.

American Depository Receipt (ADR)


Tradable right to a foreign share held in trust
by a U.S. financial institution that issues the
ADR.

Depository Receipt
combination of GDRs and ADRs

American Depository
Receipt
Types:
nonsponsored
sponsored

Trading Location
NYSE
ASE
OTC market

Advantages
trade stocks on U.S.
exchanges
payments made
and received are in
U.S. dollars
avoid some
country-specific
taxes