The number of stock markets in the world has increased drastically over the years. With this increase, more people are investing directly on these exchanges which is creating a global financial system. With Environmental, Social and Governance factors being an integral part of sustainability for the global economy, there is more scrutiny on the world’s stock markets to deliver a sustainable future through investment, for us all.
What do stock exchanges do?
Stock exchanges were created to help people buy and sell stocks. A stock is a few shares of ownership in a public company, which can be traded for money. Before exchanges were created, people had to find a buyer themselves. Now, exchanges do all the work for sellers and buyers so they can easily trade stocks.
Exchanges have done well as time has progressed because investors now have more confidence in buying from major stock markets. The stock market is basically a place where many speculate on the price of commodities such as oil or grain that are traded as contracts.
Why do we need exchanges?
Here’s an example of how an exchange works: When you want to buy something, you go on Amazon to pick it out, place the order, and pay. Stocks work the same way. When you want to buy a stock, you go on the exchange and place an order. The price of the stock is then determined by how many people are buying and selling that share of that company’s stock.
The future of stock exchanges
As time progresses, stock exchanges are becoming an increasingly popular method for companies to raise capital. With this increase in popularity, stock exchanges will continue to function as the way to trade stocks.
According to research, over $1 trillion in daily trades are made on different exchanges around the world. These numbers are only expected to increase as time progresses. And now with ESG factors in the spotlight and companies needing to be more accountable, one can expect the stock market to continue improving.
The Top 10 Stock Markets Explored:
- New York Stock Exchange (NYSE), USA
- NASDAQ (National Association of Securities Dealers Automated Quotations), USA
- Shanghai Stock Exchange (SSE), China
- European New Exchange Technology (EURONEXT), pan-Europe
- Hong Kong Stock Exchange (HKEX), Hong Kong
- Tokyo Stock Exchange (TSE), Japan
- Shenzhen Stock Exchange (SZSE), China
- London Stock Exchange (LSE), United Kingdom
- Toronto Stock Exchange (TSX), Canada
- National Stock Exchange (NSE)/Bombay Stock Exchange (BSE), India
The New York Stock Exchange (NYSE), USA
The New York Stock Exchange is one of the oldest stock exchanges in the world, located at 11 Wall Street. It was also the first stock exchange in the United States. The NYSE is considered a “public” market and trades stocks of both domestic and foreign issuers. Since its founding, the NYSE had become one of the largest exchanges in terms of total market capitalization. Major stocks include American Airlines, Apple, Amazon, Goldman Sachs, and IBM.
The exchange had began in 1914 with 12 stocks and 22 traders. At the time of the first transaction, there was no designated place for this type of trading so it took place on Coffee Exchange floor after business hours. The New York Stock Exchange opened its doors officially in 1817.
NASDAQ (National Association of Securities Dealers Automated Quotations), USA
The NASDAQ is an electronic stock exchange, which is owned by the NASD, a subsidiary of NYSE Euronext. It is located at One Liberty Plaza in New York City. With over 3000 companies listed on the NASDAQ, it is one of the most important stock exchanges. It has grown to become the second largest exchange in the United States and even trades stocks outside of America like Tokyo and London. NASDAQ refers to itself as a transparent and efficient mechanism for bringing buyers and sellers together, which helps keep costs low while encouraging competition between market participants. On August 8, 2006, NASDAQ became a fully electronic stock market.
Major stocks include General Electric, Microsoft, Apple, Coca-Cola, and ExxonMobil.
The exchange had began in 1971 with over 500 securities listed that year alone. In the beginning it was called as “NASDAQ” or the National Association of Securities Dealers Automated Quotations. The NASDAQ used to be the world’s largest electronic stock market by market capitalization. NYSE purchased a stake in this company in 2006 and it is now called NASDAQ, Inc.
Shanghai Stock Exchange (SSE), China
Shanghai became one of the most important exchanges in the world when it was first opened in 1878. It is the only stock exchange within Mainland China that is independent of any government entity. The Shanghai Stock Exchange is divided into three markets which are the A, B, and New Exchanges. Each exchange had its own dedicated trading platform. The SSE also has two different tiers for securities: core and subordinate. The core market deals with more liquid stocks that are carefully screened. The subordinate market deals with less liquid stocks and smaller companies. Shanghai is China’s biggest stock market with around 3,000 listings.
Major stocks include oil giants, PetroChina and Sinopec Limited, as well as some of China’s biggest banks like the Bank of China and Agricultural Bank of China.
European New Exchange Technology (EURONEXT), pan-Europe
Formerly the ‘Amsterdam Stock Exchange’, this exchange offers trading in all types of stocks including some American companies like Nike and Apple. The Euronext was created as a result of the merger between the Amsterdam Stock Exchange and the Brussels Stock Exchange in 2000. After its creation, it became one of the most promising exchanges in Europe. The Euronext is led by Paris and works with companies to help them become listed on its market. This includes helping them with financing and advice on specific industries.
Major stocks include Royal Dutch Shell plc and Unilever. The main markets include Paris Bourse for securities and the MATIF futures market.
Hong Kong Stock Exchange (HKEX), Hong Kong
The Hong Kong Stock Exchange was founded in 1891 and is a subsidiary of SEHK. It consists of an international exchange floor with over 1,000 companies listed on it and the Stock Exchange of Hong Kong Limited which primarily serves local companies. The HKEX is very prevalent in Asia because of its strong ties with local companies which are listed on it are traded there frequently. This makes it one of the top stock markets in the world.
In many ways it is the Asian version of the New York Stock Exchange (NYSE) but handles around 2/3rds less volume than the NYSE. Some of the major stocks it represents are CK Hutchison Holdings, HSBC Holdings plc, and Keyence Corporation.
Tokyo Stock Exchange (TSE), Japan
The Tokyo Stock Exchange (TSE) was formed in 1897 and is the largest stock exchange in all of Japan. It has 7,553 listed companies on it with an average daily trading value of $151 billion dollars. The TSE mainly handles large Japanese companies like Sony Corporation (ADR), Tokyo Electric Power Company (TEPCO), and SoftBank Group Corp. The TSE is the most valuable stock exchange in the world because of its large volume.
The TSE has a very interesting history regarding World War II and how it was affected by it. Japan initially banned trading stocks during World War II but resumed trading again in 1949. At present, the Tokyo Stock Exchange is located in a 52 story building called the “Marunouchi Building” and is very technologically advanced.
Shenzhen Stock Exchange, China
The Shenzhen Stock Exchange is one of the newest stock exchanges having been founded in late 1990s although it wasn’t officially recognized until 2002. It is still not as large as some other Asian stock exchanges but this has had little effect on its growth and it now lists over 1,400 companies. The Shenzhen Stock Exchange is more of a tech focused exchange because many of the companies it deals with are either technology or pharmaceutical related.
One interesting aspect about the Shenzhen Stock Exchange is that it was originally set up as China’s first experiment with capitalism and it had some unusual rules for traders at first including no limits on trading and no set days for trading. Today the SHENZHEN Stock Exchange is located in a building called “Finance Street Wharf” and it also houses a museum dedicated to capitalism.
Major stocks include Tencent Holdings Ltd, ZTE Corp., and China Shenhua Energy Co.
London Stock Exchange (LSE), United Kingdom
The London Stock Exchange (LSE) was founded in 17th century and is the largest stock exchange in Europe. It has nearly 1,000 companies listed on it with average daily trading value valued at $160 billion dollars. The companies listed on the LSE are primarily large UK-based organizations like GlaxoSmithKline, HSBC Holdings plc, and Prudential PLC.
Some of the major stock market events that this stock exchange has hosted throughout history are the world’s first ever public railway company in 1824 which is called “The Stockton and Darlington Railway Company” which was shortly followed by the world’s first ever public railway in 1825 called “Liverpool and Manchester Railway.” This is part of how it grew to become one of the top stock exchanges in the world.
LSE has a market cap value that exceeds $3 trillion dollars making it one of the most valuable stock markets in the world. Major stocks include Royal Dutch Shell plc, HSBC Holdings plc, BP plc, BAE Systems plc, and BP, Google, Vodafone, Unilever, and GlaxoSmithKline.
The Toronto Stock Exchange (TSX), Canada
TSX is a Canadian stock exchange based in Toronto, Ontario and was founded in 1861. It is the seventh largest exchange in the world today after Tokyo Stock Exchange (first), Euronext (second), Shanghai Stock Exchange (third), Hong Kong Stock Exchange (fourth), London Stock Exchange (fifth) and the NASDAQ (sixth). Today, TSX accounts for 2,409 listings with a market capitalization of $1.85 trillion.
The Toronto Stock Exchange was originally known as the “Toronto Stock and Mining Exchange” but it changed its name in 1934 to match other markets that were already successful. At this time, the trading floor was located on Bay Street in Toronto where it thrived for many years. On June 1st, 1999 TSX became a completely electronic stock market system opening up trading during North American business hours.
Interestingly enough, Canada ranked number five in the world for GDP growth in 2017 coming behind India, China, Japan and the USA. Canada’s market capitalization is worth around $3 trillion dollars which is pretty impressive considering that they are 1/10 the population of the USA. This could be due to Canada’s superior exchange, (Canadian Index of Wellbeing) or it might be because Canadian companies are growing at an exponential rate. The TSX is Canada’s main stock market and accounts for about 10% of trading on the Toronto Stock Exchange.
National Stock Exchange (NSE)/Bombay Stock Exchange (BSE), India
The NSE and BSE are India’s two largest stock exchanges and are located in Mumbai, India. They have a combined market capitalization of $2 trillion dollars which places them in third place after the New York Stock Exchange (NYSE) which has a market cap value of $22.5 trillion dollars. The BSE was originally known as “Bombay Stock Exchange” when it opened in 1875 which was a very popular location for trading stocks. However, it almost went bankrupt in 2001 but modernized with the help of NASDAQ and MSCI over the next several years.
The NSE and BSE rank number one in the world for trading volume with 25.5 million trades per day on an average of 321,000 daily transactions. Their market value of around 2 trillion dollars is almost half of India’s GDP which is currently estimated to be 4.6 trillion dollars. However, they are having trouble meeting the demand for trades and could be replaced by a single mega stock market which would have a combined market value of about 10 trillion dollars.
In summary on what are top stock exchanges
To summarize, the lessons from the top 10 stock markets in the world is that you have to be innovative as the world economy grows. Especially now, there is considerable pressure on the markets to define standards for Environmental, Social and Governance (ESG) issues This is why these major exchanges try to stay up to date by merging with, or buying new technology from foreign countries. Sustainability is the key to reducing our collective risk and these stack markets will play a major role in turning the tide of global warming.
Caveats, disclaimers & and the markets
We have covered many topics in this article and want to be clear that any reference to, or mention of two stock exchanges, dow jones, wall street, b shares or big companies in the context of this article is purely for informational purposes and not to be misconstrued with investment advice or personal opinion. Thank you for reading, we hope that you found this article useful in your quest to understand ESG.