What is a stock exchange?
A stock exchange is a marketplace for the buying and selling of shares, bonds and securities. Stock exchanges can serve as a measure for the health of the national economy, and can also be a key indicator of world economic strength. This is because the growth of the financial market equates to higher standards of living and employment rates.
Traditionally, stock exchanges were physical buildings in each country of operation, but with the shift toward electronic trading many have closed their trading floors and switched to online platforms. However, the institutions themselves are still around, and some of them are bigger than ever with market capitalisations of trillions of dollars.
Top 10 largest stock exchanges in the world
We’re taking a look at the top 10 stock exchanges in the world based on their market capitalisation in March 2018, which have all been adjusted to the US dollar.1 These are:
- New York Stock Exchange
- NASDAQ
- Tokyo Stock Exchange
- Shanghai Stock Exchange
- Hong Kong Stock Exchange
- London Stock Exchange
- Euronext
- Shenzhen Stock Exchange
- Toronto Stock Exchange
- Deutsche Boerse
New York Stock Exchange
The New York Stock Exchange (NYSE) is located on Wall Street in New York. It was founded in 1817, but it didn’t operate under the NYSE name until 1963. The New York Stock Exchange Group had a turbulent road to its top spot, with infamous events such as the Wall Street Crash in 1929 and Black Tuesday in 1987. But it has remained the largest stock exchange in the world by market capitalisation ever since the end of World War I, when it overtook the London Stock Exchange. In 2012, the NYSE was taken over by an American futures exchange group, Intercontinental Exchange.
The New York Stock Exchange’s market capitalisation was $23.12 trillion in March 2018 – this is nearly 40% of the total world stock market value. There are over 2400 companies listed on the New York Stock Exchange, which span sectors such as finance, healthcare, consumer goods and energy. Some of its more famous companies include Exxon Mobil Corp (XOM), Citigroup Inc (C) and Pfizer Inc (GE) – the Dow Jones is the most used index for tracking the value of the NYSE, but components can also be listed on the NASDAQ.
NASDAQ
The NASDAQ stock exchange is also in New York, located in the famous Times Square. It stands for National Association of Securities Dealers Automated Quotations and was founded by a group of local stockbrokers in 1971. The NASDAQ is unusual in that it never operated on an open outcry system; instead it has always used a computer and telephone-based system of trading, which made it the first electronic stock exchange.
The NASDAQ market capitalisation reached $10.93 trillion in March 2018, which places it as the second largest stock exchange. However, it has the largest market capitalisation of technology stocks – some of the NASDAQ’s top listed companies include Apple (APPL), Microsoft (MSFT), Facebook (FB) and Tesla (TSLA). The index used to measure the performance of the exchange is the Nasdaq 100.
Tokyo Stock Exchange
The Tokyo Stock Exchange (TSE) was founded in 1878 and is the largest stock exchange in Japan. The TSE did face problems post World War II – and was even suspended between August 1945 and April 1949 – due to the country’s involvement in the war. It was rebranded in 1949, and is now commonly known under the name of its owner: Japan Exchange Group. The group was formed in the merger between the Osaka Securities Stock Exchange and the TSE in 2013. The Tokyo Stock Exchange now partners with other exchanges all over the world, including the London Stock Exchange.
Today, there are over 3575 companies listed on the Tokyo Stock Exchange, which has taken the TSE’s market capitalisation to $6.22 trillion as of March 2018. The Tokyo Stock Exchange’s benchmark index is the Nikkei 225, which includes the top companies listed on the TSE such as Honda Motor Co, Toyota Motor Corp and Sony Corp.
Shanghai Stock Exchange
The Shanghai Stock Exchange (SSE) is one of three independent stock exchanges in the People’s Republic of China – the other two being Shenzhen and Hong Kong, which also feature on this list. The Shanghai Stock Exchange is the fourth largest stock exchange in the world, despite the fact it was only founded in 1990. The exchange’s origins do actually date back to 1866, but it was suspended in 1949 due to the Chinese revolution.
Each stock listed on the SSE has ‘A’ shares that are priced in the local yuan currency, and ‘B’ shares that are quoted in US dollars. ‘A’ shares are for domestic investment only, with the exception of investors who qualify for the foreign investment scheme, while ‘B’ shares are available to both domestic and foreign investors.
The Shanghai Stock Exchange’s market capitalisation reached $5.01 trillion in March 2018. Traders can track the performance of stocks listed on the Shanghai Stock Exchange using the SSE Composite index, also known as the Shanghai Composite. This includes the largest stocks on the Shanghai Stock Exchange, such as PetroChina, the Industrial and Commercial Bank of China and the Agricultural Bank of China.
Hong Kong Stock Exchange
The Hong Kong Stock Exchange (SEHK) was founded in 1891 by the Association of Stockbrokers in Hong Kong – it was renamed the Hong Kong Stock Exchange in 1914. The SEHK is one of the three stock exchanges in China, but the physical trading floor of the SEHL was closed in 2017 because of the shift toward electronic trading.
The Stock Exchange of Hong Kong is the third-largest stock exchange in Asia, and the fifth largest in the world with a market capitalisation of $4.46 trillion in March 2018. The Hong Kong Stock Exchange trades in Hong Kong Dollars (HKD), as the companies listed are primarily based in Hong Kong. There are 1955 companies listed on the Hong Kong Stock Exchange – a large portion of the Hong Kong Stock Exchange’s market capitalisation comes from its 20 largest stocks, which include AIA, Tencent Holdings and HSBC Holdings.
London Stock Exchange
The London Stock Exchange (LSE) was founded in 1801, but its origins date back to 1698 when the LSE’s service was nothing more than a twice-weekly paper publication of market prices. This makes it the one of the oldest stock exchanges in the world. It was actually the largest stock exchange in the world up until the end of World War I, when it was dethroned by the NYSE. The LSE is now the sixth largest stock exchange in the world, and the largest stock exchange in Europe.
The LSE is owned by the London Stock Exchange Group, which was created in 2007 when the LSE merged with the Borsa Italiana. It is the most international stock exchange, with over 3000 companies across 70 countries.
The market capitalisation of the London Stock Exchange was $4.38 trillion in March 2018. Traders can track the performance of the LSE, and its market capitalisation, with the Financial Times Stock Exchange Index 100 Share Index, or FTSE 100. The index contains the top 100 companies listed on the London Stock Exchange – including Barclays, BP and GlaxoSmithKline. There are other indices that can be used to track the London Stock Exchange-listed companies, including the FTSE 250, the FTSE Small Cap and the FTSE All-Share.
Euronext Stock Exchange
The Euronext Stock Exchange is based in Amsterdam, Netherlands, but it is a pan-European exchange – it spans the Netherlands, Portugal, Belgium, France, Ireland and the UK. It was founded in 2000 to represent the economy of Europe as a whole, which is why it operates in euros.
In 2007, Euronext merged with the NYSE Group to form NYSE Euronext, and in 2013, Intercontinental Exchange took over the exchange completely. Then, in June 2014, Euronext went public in order to become a standalone company again.
Euronext is the seventh largest stock exchange in the world, with a market capitalisation of $4.36 trillion. Because the exchange includes several countries, there are 1300 listed companies and 30 stock indices that can be used to track its performance. However, the dominant stock index for Euronext-listed companies is the Euronext 100, which is made up of the largest and most liquid stocks on the Euronext Stock Exchange – including AXA, Christian Dior and Renault.
Shenzhen Stock Exchange
The Shenzhen Stock Exchange (SZSE) is the third exchange of the People’s Republic of China. Although it was founded in 1987, it wasn’t formally operational until 1990. The SZSE is a self-regulated body, but it is supervised by the China Securities Regulatory Commission (CSRC).
The Shenzhen Stock Exchange had a market capitalisation of $3.49 trillion in March 2018, which made it the eighth largest stock exchange in the world.
The SZSE trades shares in Chinese yuan because the companies listed on the Shenzhen Stock Exchange are primarily based in China. The Shenzhen Stock Exchange is also home to the SME Board established in 2004 for businesses in the manufacturing sector, and the ChiNext board, which was launched in 2009 to replicate the NASDAQ’s focus on technology start-ups.
Toronto Stock Exchange
The Toronto Stock Exchange (TSX) was founded in 1852. It is the largest stock exchange in Canada, with over 1500 companies listed. In 2009, the TSX merged with the Montreal Stock Exchange and so the parent company was renamed from TSX Group to TMX Group. The TMX Group was in talks to merge with the London Stock Exchange in 2011, but this fell through after it failed to get approval from shareholders.
The TSX is the third-largest stock exchange in North America by market capitalisation, and the ninth largest in the world – in March 2018, the market capitalisation of the Toronto Stock Exchange was $2.29 trillion. Some of the most significant companies listed on the Toronto Stock Exchange include the Royal Bank of Canada and Suncor Energy Inc. The top 100 companies on the TSX can be tracked using the S&P/TSX Composite Index, which accounts for roughly 70% of the Toronto Stock Exchange market capitalisation.
Frankfurt Stock Exchange
The Frankfurt Stock Exchange (FWB) was founded in 1585 to fix currency rates, but in the following centuries it became considered as one of the first stock exchange’s in the world – alongside the London Stock Exchange and Paris Stock Exchange. It was only after World War II that the Frankfurt Stock Exchange was officially established as Germany’s leading stock exchange.
In 1993, ownership of the Frankfurt Stock Exchange was transferred to the company Deutsche Bӧrse AG, which was also in talks to take over the London Stock Exchange. These talks fell through in 2005.
The market capitalisation of the Frankfurt Stock Exchange was $2.22 trillion in March 2018, which places it as the tenth largest stock exchange in the world. The companies listed on the Frankfurt Stock Exchange are primarily based in Germany and other countries that trade using the euro. The primary index used to track the performance of the Frankfurt Stock Exchange is the DAX – a blue-chip stock market index for the top 30 companies on the FWB, which includes companies such as Adidas, BMW and E.ON.
Trading stock exchanges
You cannot trade on the price of a stock exchange directly, but you can gain exposure to the overall performance of companies on the largest stock exchanges by trading the stock indices mentioned throughout this article.
Alternatively, you could trade or invest in the shares of individual companies on the exchanges, or an exchange traded fund (ETF) – which tracks the performance of a basket of shares.
To gain exposure to stock exchanges, you can:
- Invest in stocks or ETFs by opening a share dealing account with IG
- Start trading CFDs or spread betting on the price of indices, stocks and ETFs by opening a live account with IG
- Build your confidence in a risk-free environment by opening a demo account
If you don’t feel ready to start trading, you can learn more about financial markets with IG Academy’s range of online courses.
