The World’s Most Important Stock Exchanges
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Did you know the stock market has a history that dates back over 500 years? From its beginning in Antwerp in the 16th century to the current day, it has developed from a small scale exchange into a massive, worldwide market. There are now sixty major stock exchanges in the world which house stock markets all ranging in different sizes and trading volumes.
This article will provide you with all you need to know about what goes on in a stock exchange and the history of the world's most important stock exchanges.
What Is A Stock Exchange?
A stock exchange was historically a place where sellers and buyers would meet to conduct business regarding the sale and purchase of goods. Nowadays, it is most commonly associated with being a marketplace for the buying and selling of financial products such as stock and shares.
Initially, a stock exchange was a physical building where traders would come to trade face-to-face with other traders, shouting and screaming their buy and sell orders. However, due to new milestones in technology, most stock exchanges shifted toward electronic trading which has now help traders gain better access to international markets.
The total value of the sixty major stock exchanges in the world currently amounts to around $69 trillion. However, over 93% of this value is divided between three continents: North America, Asia and Europe. Below are eight of the world's most important stock exchanges you need to know about, including:
- The New York Stock Exchange
- The NASDAQ Stock Exchange
- The London Stock Exchange
- The Amsterdam Stock Exchange & Euronext
- The Xetra/Börse Frankfurt Stock Exchange
- The Warsaw Stock Exchange
- The Tokyo Stock Exchange
- The Hong Kong Stock Exchange
The New York Stock Exchange
The New York Stock Exchange (NYSE) is perhaps the world's most well-known stock exchange with its famous 9.30am opening bell which is televised and presented by leading business figures and celebrities. Nicknamed 'The Big Board' the exchange was founded in 1817 but did not operate under the NYSE name until 1963. Headquartered at 11 Wall Street in Manhattan, New York, the building was recognised as a national landmark in 1978.
After weathering historic events such as the Wall Street crash in 1929 and Black Tuesday in 1987, it has remained the world's largest stock exchange by market capitalisation ever since the end of World War I. In the process, it overtook the London Stock Exchange for the world's top spot.
In January 2018 the New York Stock Exchange market capitalisation amounted to over $30 trillion and is now home to over 2,300 publicly traded companies. These companies cover a wide range of sectors such as energy, finance, consumer goods and healthcare. Some of the exchange's most famous companies include Bank of America, Disney and Exxon Mobil.
The NASDAQ Stock Exchange
The NASDAQ stock exchange stands for the 'National Association of Securities Dealers Automated Quotations' and is the world's second-largest stock exchange by market capitalisation. The NASDAQ is also based in New York - in the world famous Times Square. Founded in 1971 by the NASD (National Association of Securities Dealers) the exchange was the first of its kind.
Instead of using the traditional 'open outcry' method - which involved traders shouting their buy and sell orders in the trading pits - the NASDAQ stock exchange operated exclusively through computers and telephones. This made the NASDAQ the world's first electronic stock exchange and they now specialise in listing only technology-based companies.
After buying both the Boston and Philadelphia stock exchange in its early years, the NASDAQ reached a market capitalisation of around $10 trillion at the beginning of 2018. In fact, the exchange now lists more than 3,800 companies that are all deemed to be tech-related companies. This includes the likes of Apple, Facebook, Google (now Alphabet) and Starbucks. The popular, and well known, NASDAQ 100 Index is used to gauge the performance of the exchange as well as the technology sector as a whole.
The London Stock Exchange
The London Stock Exchange (LSE) originally started out as a newspaper publication of market prices in 1698. However, in 1801 they started to facilitate the buying and selling of shares making it one of the oldest stock exchanges in the world. In fact, it was the largest stock exchange in the world until the end of World War I, when the New York Stock Exchange took the top spot.
Headquartered in Paternoster Square in London, England, the London Stock Exchange lists more than 3,000 companies from over seventy countries making it the largest stock exchange in Europe, the sixth largest stock exchange in the world and the stock exchange with the largest number of international companies.
In early 2018, its market capitalisation headed towards nearly $5 trillion in value. The exchange - now owned by the London Stock Exchange group after they merged with Borsa Italiana in 2007 - is home to the FTSE 100 Index. This contains the top 100 companies listed by value on the London Stock Exchange, and includes the likes of oil giant BP, banking giant HSBC, telecommunications giant Vodafone, among others.
The Amsterdam Stock Exchange & Euronext
The Amsterdam Stock Exchange (AEX) was founded in 1602 and was primarily an exchange for commodities rather than securities like stocks and shares. However, it went on to list the first ever multinational corporation to issue stock - the Dutch East India Trading Company. This is why the Amsterdam Stock Exchange is considered the oldest stock exchange in the world that is still in operation.
In 1997 the Amsterdam Stock Exchange and the European Options Exchange (EOE) merged. This gave birth to the widely used AEX stock market index. However, in September 2000 the exchange also merged with the Brussels Stock Exchange and the Paris Stock Exchange. The resulting entity is now known as Euronext.
The newly formed Euronext exchange is now one of Europe's biggest stock exchange's with over 1,300 listed companies providing a market capitalisation of nearly €4 trillion in 2018. Not only is the Euronext exchange home to the AEX 25 Index (the top twenty five companies listed on the Euronext Amsterdam), it also operates the CAC 40 Index (the top forty companies listed on the Euronext Paris Stock Exchange) and the BEL 20 Index (the top twenty companies listed on the Euronext Brussels exchange).
This makes the Euronext exchange home to some of Europe's most famous publicly traded companies such as Air France KLM, ING, Heineken and Renault.
The Xetra/Börse Frankfurt Stock Exchange
The Xetra/Börse Frankfurt Stock Exchange is the largest of Germany's seven stock exchanges, owned by the Deutsche Börse AG group. The exchange was originally founded in 1585 to trade currency rates. However, it now facilitates advanced electronic trading on stocks and shares through its own fully electronic trading system.
Since taking ownership in 1993, the Deutsche Börse AG group operates two trading venues at the Frankfurt Stock Exchange - Xetra and Börse Frankfurt. Xetra is the market for trading in German equities and is also home to the widely traded DAX 30 Index (an index of the largest thirty companies listed on Xetra at the Frankfurt Stock Exchange). The Börse Frankfurt is a trading venue for private investors with more than one million securities of German stock, and is also where specialists on the trading floor manage the trading of securities.
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In 2018, the market capitalisation of the Frankfurt Stock Exchange reached over $2 trillion, placing it in the top ten of the largest stock exchanges in the world. Most of the companies that are listed on the exchange are based in Germany and other euro-denominated countries. The exchange lists well known German companies such as Adidas, BMW, and Volkswagen.
The Warsaw Stock Exchange
The Warsaw Stock Exchange (WSE) is a much newer entry into the exchange market than some of its rivals. Founded in 1991 and located in Poland, the exchange allows electronic trading on a variety of stocks, shares and bonds. It is now the largest stock exchange in Eastern Europe with a listing of 3,000 different instruments and a market capitalisation of around $450 billion in 2017.
In 2008, the Warsaw Stock Exchange was recognised as an 'Advanced Emerging' exchange by the Financial Times Stock Exchange company. However, in 2017 the exchange was upgraded to 'Developed Market' status. The stock exchange is also home to the WIG 20 Index (twenty of the largest companies listed on the Warsaw Stock Exchange).
Perhaps the most interesting fact about the Warsaw Stock Exchange is that it was created as a joint-stock company on April 12, 1991, by the State Treasury who still have a 35% shareholding in the exchange.
The Tokyo Stock Exchange
The Tokyo Stock Exchange (TSE) is the largest stock exchange in Japan, founded in 1878. After World War II, the exchange went through a series of changes and is now known as the Japan Exchange Group. This group was created when the Tokyo Stock Exchange merged with the Osaka Securities Stock Exchange in 2013.
With over 3,500 companies listed on the Tokyo Stock Exchange and a 2016 market capitalisation of over $5 trillion, it is the third largest stock exchange in the world.
Interestingly, Japanese stock trading represented 45% of the global stock market volume in 1989. While North American trading volumes are now the biggest in the world, the Tokyo Stock Exchange still hosts some of the world's biggest publicly traded companies such as Toyota Motor Corp and Sony.
The globally recognised and widely traded Japan 225 Index, or Nikkei 225 index, is the Tokyo Stock Exchange's benchmark index.
The Hong Kong Stock Exchange
The first formal stock exchange market was established in 1891 and called the Stockbrokers' Association of Hong Kong. In 1914 it was renamed the Hong Kong Stock Exchange. While the Stockbroker's Association created another exchange in 1921, the two merged to form the Hong Kong Stock Exchange in 1947 which re-established the country's stock market after World War II.
Companies listed on the Hong Kong Stock Exchange are primarily based in Hong Kong and listed in Hong Kong Dollars (HKD). The exchange is one of the largest in Asia with over 2,100 listed companies at the end of 2017. In 2018, the Hong Kong Stock Exchange reached a market capitalisation of over $4 trillion making it the fifth largest stock exchange in the world.
The Hang Seng Index is the benchmark index for the Hong Kong Stock Exchange. The top listed companies within the index are primarily comprised of banks and insurance companies from mainland China. However, the Chinese internet company, Tencent Holdings, currently holds the top spot in the index. In fact, the twenty largest stocks listed on the Hong Kong Stock Exchange make up the largest portion of the total market capitalisation of the exchange.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.