A stock exchange is a financial marketplace where investors can buy and sell securities, including stocks, bonds, derivatives, commodities and other financial instruments.
Such transactions are conducted based on rules and regulations laid down by each exchange.
In addition, a stock exchange serves as a measure of the economy’s health.
You may have heard of some of the more popular exchanges in the world.
But, there are a few large stock exchanges with which we may not be familiar.
Bourses in emerging markets also possess huge potential for future growth as they can grow at a much faster rate than developed economies.
Here is a list of the 10 largest stock exchanges in the world.
1. New York Stock Exchange (NYSE), USA
With a market capitalisation of US$26.2 trillion, the NYSE is the world’s largest stock exchange.
The NYSE is one of the oldest stock exchanges that was established in 1792 and has more than 2,400 listed companies.
Home to global household names such as Coca Cola (NYSE: KO), Walmart (NYSE: WMT) and J.P. Morgan Chase (NYSE: JPM), billions of dollars flow through the exchange every year.
American stock exchanges have always carried an elevated sense of legitimacy, which ultimately provides easy access to capital and fund-raising for companies that trade there.
Trading on big American exchanges also does the job of putting some investor concerns at bay.
That is because non-US companies must comply with the Securities and Exchange Commission (SEC) and accounting regulations, thus providing a more transparent process to investors.
One of the most common indices on NYSE is the Dow Jones Industrial Average (DJIA), a price-weighted index of the 30 most prominent stocks.
Other popular indexes include the S&P 500 Index, which tracks the 500 largest companies in the USA, and the Russell 2000, a market index which tracks 2,000 small-cap companies.
2. National Association of Securities Dealers Automated Quotations (NASDAQ), USA
Coming in second is the NASDAQ.
It was the first electronically traded stock exchange in the world, established in 1971.
With more than 3,000 listed companies, the NASDAQ has a total market cap of US$28.3 trillion.
As another one of the largest stock exchanges in the world, the NASDAQ is also home to notable companies such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL).
Unlike the NYSE which is generally more diversified across different sectors, the NASDAQ is more heavily weighted towards the technology, health care and consumer services sectors.
3. Shanghai Stock Exchange (SSE), China
Home to the world’s second-largest economy, China also hosts one of the largest stock exchanges in the world.
The SSE is the third largest stock exchange in the world and the biggest in Asia.
It comprises more than 1,500 public limited companies whose combined market capitalisation is US$6.87 trillion.
What separates the SSE from Western exchanges is government regulation.
The Chinese government regulates the equity markets and foreign investments in its domestic companies are heavily scrutinised.
Class ‘A’ shares which are priced in the local yuan currency are for domestic investment only.
On the other hand, Class ‘B’ shares which are quoted in US dollars are available for both foreign and domestic investors.
The SSE’s benchmark index is the SSE Composite Index, which includes all stocks on the exchange.
Other indexes include the SSE 50 Index and SSE 180 Index, which are the float-adjusted capitalisation indexes of the top 50 and 180 stocks respectively.
4. European New Exchange Technology (EURONEXT), Europe
Euronext is a multi-state stock exchange which is located in Amsterdam, Netherlands.
Also, Euronext has more than 1,300 companies listed with a total market capitalisation of US$6.65 trillion.
The most dominant index is the blue-chip Euronext 100, which comprises the 100 largest and most liquid stocks.
5. Hong Kong Stock Exchange (HKEX), Hong Kong
Hong Kong is considered one of the world’s major financial hubs and therefore the HKEX rightly makes this list.
The Hong Kong Stock Exchange was established in the year 1891 and is the third-largest exchange in Asia.
Also, it has more than 2.200 companies, of which 50% are from mainland China.
The current market capitalization of HKEX is at US$43.6 trillion, where the top 20 companies constitute the majority of the market capitalisation.
The primary index is the Hang Seng Index, a free-float, adjusted-market capitalisation-weighted index comprising 50 stocks and which forms about 58% of the total HKEX’s market capitalisation.
6. Tokyo Stock Exchange (TSE), Japan
Tokyo Stock Exchange is also known as Tosho, headquartered in Tokyo, Japan.
The TSE was established in 1878 and lists 3,700 companies with a market capitalisation totaling around US$5.67 trillion.
The two leading indices on TSE are Tokyo Price Index (TOPIX) and the Nikkei 225.
The TOPIX uses a free-float capitalization-weighted metric to rank companies, while the Nikkei 225 ranks the top 225 stocks by price.
Real estate and stock prices in Japan came to a head in the 1990s, leading to a huge stock market crash that resulted in severe economic repercussions.
This period is generally referred to as Japan’s Lost Decade.
7. Shenzhen Stock Exchange (SZSE), China
Number seventh on this list is the Shenzhen Stock Exchange with a market capitalisation of US$5.24 trillion.
Established in 1990, the SZSE is the second-largest stock exchange in China after the Shanghai Stock Exchange.
Since a small number of investors own the majority of stocks within the China market, the slightest sign of market stress can lead to large price swings.
Most companies are based in China and trade in Renminbi.
Also, the SZSE provides a trading platform for two sets of shares, “A” shares trade in local currency while “B” shares trade in US dollars and are suitable for foreign investors.
8. London Stock Exchange (LSE), United Kingdom
Among the oldest stock exchanges in the world, we have the London Stock Exchange which was set up way back in 1801.
Approximately 3,000 companies are listed on the LSE, amounting to a total market capitalisation of US$4.13 trillion.
The main index on LSE is the Financial Times and London Stock Exchange (FTSE) 100 index.
9. Toronto Stock Exchange (TSX), Canada
Founded in 1861, the Toronto Stock Exchange is a wholly owned subsidiary of the financial services company of TMX Group (TSE: X).
With more than 2,200 listed companies, TSX accounts for a total market capitalisation of US$3.1 trillion.
Interestingly, the TSX has an affinity towards mining, oil and gas companies.
Its flagship index is the Standard and Poor (S&P)/TSX 60, which is mainly dominated by energy companies.
In addition, the top 100 companies can be tracked by the TSX Composite Index, which accounts for approximately 70% market capitalisation of the Toronto Stock Exchange.
10. Bombay Stock Exchange (BSE), India
Set up in 1875 during British rule, the BSE is Asia’s first stock market.
BSE has more than 5,500 listed companies, which makes it the exchange with the largest number of listings.
The total market capitalisation of BSE is US$3.5 trillion.
Home to the S&P BSE SENSEX, the exchange offers exposure to equities in regions such as Brazil, Russia, China and South Africa.
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Disclosure: Ryan Yap owns shares of Microsoft and Alphabet.