The ASX share market game is conducted bi-annually, each player is assigned a hypothetical AUD$50, 000. This year however due to technical difficulties game one was cancelled. The Australian Stock Exchange’s (ASX) education arm administers the share market game. The share market game has some very specific rules for trading and takes into account actual functioning of the ASX. Therefore, the simulation is very close to actual trading. Below are some specifics of this year’s games rules.

The Trading PeriodThe first day of trading in the Game is Thursday 6 September 2007 and the last day of trading is Wednesday 14 November 2007 (”Game Period”).

Trading hours indeed reflect the true nature of ASX trading hours making the simulation more realistic

An order to buy or sell shares may be placed at any time of the day during the Game period. Orders will only be matched during the trading hours of the ASX market (which is usually 10.00 AM EST and 4.15 PM EST). Orders in the Game are not matched until they have been matched on the ASX market (i.e. if a participant places an ‘at market’ order to buy or sell a parcel of shares, it will not be executed until there is a match on the ASX market). Orders placed ‘at market’ when the ASX market is closed will be processed at the opening trade price on the next trading day. ‘At market’ orders will be processed within the limitations of the stock volumes available for trading in the ASX market. ‘At market’ and ‘at limit’ orders that can be filled will be processed continuously from the time the ASX market is open at 10:00 AM EST to the time the ASX market closes at 4:10 PM EST*.

* PLEASE NOTE - the Game seeks to emulate certain aspects of the ASX market, therefore orders placed from approximately 4:00 PM EST to 4:10 PM EST may still be on-market trades due to the Closing Single Price Auction (CSPA) that takes place at approximately 4.10 - 4.12 PM EST Further, when there is a price sensitive announcement received after 4.00pm and less than 10 minutes before the CSPA, the security is placed into a pre-open state and will not take part in that day’s CSPA. The security will remain in pre-open until the opening auction the following business day.

Buying and selling shares in the Game. Here is where additional rules were added to limit the number of transaction that can be carried out in a day and a diversification rule.

Company list

Only shares in the 100 ASX nominated companies that are part of the ASX nominated list (the ‘Company List’) may be traded. Ordinary shares and bonus shares are the only classes of securities that may be traded in the Game. Other classes of securities such as company options cannot be traded in the Game.

Hypothetical starting cash

Each participant will commence the Game with a theoretical AUD$50,000.00 with which to purchase shares. Surplus funds may be left as ‘cash-on-hand’. The ASX Group reserves the right to amend a participant’s ‘cash-on-hand’ funds if any errors occur. However, the ASX Group accepts no liability or responsibility for any loss or damage from any error or the correction thereof.Minimum marketable parcelIf a participant wishes to purchase shares in a company, shares can be purchased in any dollar amount. There is no restriction on how many shares or what value of shares may be sold.

25% diversification rule

A participant cannot purchase a quantity of shares in one particular company which results in the value of the participant’s total holding in that company comprising 25% or more of the participant’s total portfolio value at the time of purchase.This rule is not breached in the event that the share price of a particular company that is already held by the participant increases such that it subsequently results in the company comprising 25% or more of the participant’s total portfolio value, accordingly, the participant is not required to sell that stock.

Placing an order

At market ordersAn order to buy or sell stock in the Game must be placed via the Trading page. Orders can be placed ‘at market’ or ‘at limit’. If an order is placed ‘at market’, the next price for that stock, after the order is received, will be used to process that order. The quantity of shares requested will be either filled in its entirety or partially filled according to the last volume traded for that stock on the ASX market.

At limit orders

If an order is placed ‘at limit’ the participant must nominate a price at which they are prepared to buy or sell the stock and the order will remain in the ‘Orders pending’ section of the Trading page until the last sale price (in the case of a buy order) or the last buy price (in the case of a sale order) in the ASX market matches the participant’s nominated price. The quantity of shares requested ‘at limit’ will be either filled in its entirety or partially filled according to the last volume traded for that stock on the ASX market.

Brokerage is the final component of the game rules. The brokerage charged roughly reflects the industry average.

Brokerage will be charged against the theoretical trade value on each purchase or sale of stock at the rate of AUD$30.00 for each trade for orders valued up to and including AUD$10,000.00. For each trade over AUD$10,000.00, brokerage at the rate of 0.3% of the trade value will be charged. To simulate ASX market conditions, the brokerage fees include GST.If an order to buy or sell shares is partially filled, brokerage will be charged only on the dollar value of shares that have actually been purchased or sold. The Game will however keep a record of brokerage that a participant was charged when the first partial order to buy or sell shares was executed so that a participant will pay no more brokerage than the standard rate set out above. For example, if a participant wishes to buy 5,000 ABC Company shares at AUD$1 each and only 2,600 are filled the participant will pay AUD$30 brokerage. When the remaining 2,400 shares in ABC Company are subsequently executed the participant will not be required to pay additional brokerage as the total amount of brokerage paid on 5,000 shares worth AUD$1 each (AUD$30) has already been paid. If a participant ordered 25,000 ABC Company shares at AUD$1 each and 10,000 are filled (AUD$30 brokerage paid) and the order for the remaining 15,000 is later filled, the participant will pay brokerage of 0.3% on the outstanding 15,000 ABC Company shares.

Source https://www9.asx.com.au/Smg/CharityRules

I have been a bit slow out of the blocks this year and will make my first trades in the game today. If you are an Australian resident and want to sign up for the next game starting in 2008 you can do so at the ASX web site.

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