A Veteran Brokers Perspective on Trading Australian Stocks
By Rod Blake
Over three some odd decades as a broker I had numerous occasions to be exposed to Australians, their Australian Stock Exchange (ASX) and Australians trading our Canadian markets. Sydney Australia, the country’s largest economic centre, is 20-hours ahead of Vancouver and is often the next day. Time of day there is somewhat more difficult to keep in one’s head than say Toronto which is just 3-hours ahead of Vancouver and usually is in the same day. To make it easier on myself I used to refer to the time in Sydney as 7-hours behind – but tomorrow.
My first experience with Australians was in the late 1980s. A Vancouver junior miner Blackswan Gold ‘BSW-V’ had made a significant gold discovery in Australia and the Aussies as well as Canadians were anxious to get involved with the company’s stock. In those days, Blackswan only had a Vancouver Stock Exchange (VSE) listing. Aussies looking to buy the stock would place orders through their trading desks and because of the time change – the orders would land on our trading desk while we were closed for the night. These orders were then held until the VSE opened at 6:30 am local time. And because of the extreme time differences and exchange of the dollars most of the orders were ‘at the market’ orders. That is – orders with no fixed price. You can imagine what market orders to buy thousands of BSW shares at the open would do to the BSW market every morning – especially on a Monday morning when two days of orders had piled up. The stock that was normally trading at about C$4 would surge up by a dollar or more first thing in the morning and then gradually trade in a more orderly manner as the day went on. This action went on for many months until Blackswan was taken over by an Australian miner. Early morning traders had a field day with this price action.
Going the other way – Vancouver to Australia trading became more commonplace early this century along with a new bull market in gold. ASX listed explorers were making discoveries and investors in North America were hearing about them via the internet and satellite. Now it was me endeavouring to get an order to go the other way and try and get a good fill for my clients. The Australian market opened after we had closed for the day and traded into the Vancouver night so I would place my orders with our overseas desk after the Vancouver close and get my confirmations when I arrived at my desk the next day. I knew the risks of placing blind market orders from the Blackswan era so I concentrated on the currency exchange and general market direction and placed my ‘limit orders’ accordingly. Limit orders have a specific price that must be reached for a fill. Placing a limit order a little above the market on a good day or below on a down day usually resulted in a reasonable fill for the client.
Fast forward another few years and the American Over The Counter (OTC) Market was capturing more and more of the junior resource business. Many exploration companies from around the world (including Australia) took advantage of this electronic trading platform and obtained listings on the OTC to broaden their company’s shareholder and trading platforms. The OTC used ‘market makers’ who tracked the price and volume action of a stock on its home exchange and then made a parallel market for the stock on the OTC market. The more liquid the stock, the greater the number of market makers were involved which resulted in better fills. The OTC market greatly streamlined my overseas business as I could now track an Australian stock in real North American time, place my orders accordingly through my own computer and receive fills during my regular day. The only drawback being the annoying currency exchange fees and that my fills came back in U.S. dollars. A small price to pay to avoid trying to buy or sell a stock 7-hours behind – but tomorrow.
To summarize – with modern technology trading Australian securities today is much easier than when I started. If you’re endeavouring to trade Australian stocks directly on the ASX from North America – remember that Sydney time is anywhere from 13 to 17-hours ahead.
You can identify a Australian listed equity by their ASX identifier ‘A’ such as ABC Recourses ‘ABC-A’ or ‘ABC.A’.
Remember you will have currency exchanges. As I write this the Australian dollar is now approximately US$0.67 and the Canadian Loonie is about US$0.75.
Try to use ‘limit’ orders as opposed to ‘market’ orders as markets can change quite a bit with the time delay.
Many Australian companies now have U.S. OTC listings which allows you to trade the stock in real time in U.S. dollars. You can usually identify them with the OTC foreign identifier ‘F’ of ‘FF’ such as ABC Resources ‘ABC-F’ of ‘ABC-FF’.
A full service broker can do all of the above for you.