Last updated: 14 Aug, 2021 | 04:26 pm
The stock market is the single largest wealth creation tool. The world’s greatest stock exchanges have market capitalizations (MCap) amounting to multiples of trillions of dollars. In this article, we will look at the top ten stock exchanges in the world. Although the top places are dominated by the developed world, the developing world is catching up, with China and South Asia on the list. It shows that the appetite for stocks, shares, and other financial instruments is geography-neutral. Especially since governments across the world are easing restrictions on investments in stock markets across the world. In India for instance, the Reserve Bank of India (RBI) eased restrictions in 2004 remitting foreign exchange abroad. This allows Indians to invest in US stocks in US exchanges.
As with any investments, research, due diligence, and good data and analytics are critical factors in successful stock market investing.
Now, let’s begin the countdown.
10. National Stock Exchange (NSE)/Bombay Stock Exchange (BSE), India
As of May 2021, the Mumbai-based NSE has reached an MCap of $3tn. It is the youngest stock exchange on this list, having only been in existence since 1992 as India’s first dematerialized (demat) electronic exchange. It has over 1950 companies listed on it. Its flagship index is the NIFTY 50, comprising the top 50 stocks on the exchange. The index is a primary indicator of the Indian stock market’s health, with domestic as well as foreign investors keeping a keen eye on it.
The NSE’s position in India is continuously threatened by the venerable Bombay Stock Exchange (BSE), which has an MCap of around $3.1tn as of May 2021. Set up in 1875, the BSE is Asia’s first stock market. It lists around 5000 companies on it. Its benchmark Sensex index consists of 30 established stocks. The BSE also allows trading in equities in China, Russia, Brazil, and South Africa.
09. Toronto Stock Exchange (TSX), Canada
Founded on 25 October 1861, the TSX is a wholly-owned subsidiary of financial services company TMX Group. The TSX has 2231 listed companies as of November 2019, totaling an MCap of $3.1tn. Financial instruments traded on the TSX include exchange-traded funds (ETFs), equities, bonds, futures and options, commodities, investment trusts, etc. The TSX has a special affinity for oil and gas (O&G) and mining companies, with more such companies listed on it than any other stock exchange in the world. On average, its monthly trading volume is around $97bn. In the 2010-11 period, the TSX was looking to merge with the London Stock Exchange (LSE), hoping to make it an entity with an MCap of almost $6tn. However, talks broke down since the proposition did not receive the required 67% approval from TSX shareholders.
The TSX’s benchmark index is the Standard and Poor (S&P)/TSX 60, mainly dominated by energy companies.
08. London Stock Exchange (LSE), United Kingdom
Among the oldest established stock exchanges in the world (est. 1801), the LSE has more than 3000 listed companies totaling an MCap of $3.71 tn. The LSE set up the first benchmark price, market, and equity-market liquidity data in Europe. Its benchmark index is the Financial Times and London Stock Exchange (FTSE) 100 index. Other indexes include the FTSE 250, the FTSE 350, and the FTSE All-Share index.
There LSE has two markets to trade on — the Main Market, which has over 1300 big companies all over the world. The other market is the Alternative Investment Market, an international market for smaller cap companies.
The LSE’s secondary market instruments include bonds, derivatives, ETFs, debt securities, exchange-traded commodities (ETCs), global depository receipts (GDRs), gilt-edged securities, among others.
The LSE merged with Borsa Italiana S.P.A, the Italian stock exchange, in June 2007, with the merged entity called the London Stock Exchange Group (LSEG).
07. Shenzhen Stock Exchange (SZSE), China
Established in 1990, the SZSE is the seventh on this list, with an MCap of around $3.9 trillion. Around 1900 companies are listed on it, with the majority of them based in China. The exchange is the trading platform for A-shares (which trade in the local currency) and B-shares (trading in US dollars for foreign investors), as well as other common instruments, such as mutual funds, options and futures, ETFs, etc.
Its benchmark indexes include the SZSE Component Index, comprising 500 stocks and the SZSE 100, a listing of the top 100 companies on the exchange.
Although the SZSE is a self-regulatory legal entity, it is closely supervised by the China Securities Regulatory Commission (CSRC). The CSRC has the power to step in during times of high volatility. For instance, at a particular point in a stock’s price variation, it can step in and stop trading on that stock for the day.
06. Tokyo Stock Exchange (TSE), Japan
The TSE was established in 1878 and lists 3700 companies with an MCap totaling around $5.67tn. Some of the greatest companies in the world are listed on this exchange are Toyota, Honda, Mitsubishi, Sony – all household names across the world.
Its two main indexes are the Tokyo Price Index (TOPIX) and the Nikkei 225. The TOPIX ranks companies using a free-float capitalization-weighted metric, while the Nikkei 225 ranks the top 225 stocks by their price.
The TSE has two sections: the First Section comprises large companies and the Second Section includes mid-sized companies. Its trading products include stock, global equities, index funds, index futures, etc. It is well-known for its compliance and market surveillance mechanisms. Infamously however, real estate and stock price inflation in Japan came to a head in the 90s, leading to the TSE crashing and serious economic decline. This period is generally referred to as Japan’s Lost Decade.
05. 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. Set up in 1891, it has 2538 companies listed on it, with an MCap totaling $6.48tn. Its benchmark index is the Hang Seng Index, a free-float, adjusted-MCap-weighted index comprising 50 stocks, which form about 58% of the total HKEX’s MCap. The exchange is home to some of the biggest companies in the world, such as PetroChina, China Mobile, and HSBC Holdings, AIA, Bank of China, China National Offshore Oil Corporation (CNOOC), Agricultural Bank of China, Tencent Holdings, etc.
The HKEX has gone through several significant mergers, such as those with the Hong Kong Futures Exchange Ltd and Hong Kong Securities Clearing Company Ltd.
Even big companies can trade normally on the HKEX at less than HK$4 per share. Penny stocks are classified as such only if the price falls below HK$0.5.
04. European New Exchange Technology (EURONEXT), pan-Europe
The Amsterdam-headquartered Euronext is a pan-European stock exchange network, with an MCap of $6.65tn. Euronext operates exchanges in Amsterdam, London, Paris, Lisbon, Brussels, Dublin, Milan, and Oslo. Euronext’s offerings include equity as well as derivatives, with products such as stocks, ETFs, bonds, forex trading, options and futures, etc. It lists more debt and funds than any other exchange worldwide.
It has many flagship indexes, such as the blue-chip Euronext 100, comprising the 100 most liquid and largest stocks on the exchange. French companies make up almost 65% of this index. Noted companies include Aegon, Peugeot, Michelin, Phillips, Alstom, L’Oreal, ArcelorMittal, BNP Paribas, Royal Dutch Shell, Unilever, Schneider Electric, and so on.
Other indexes on the exchange include national indexes such as AEX (Netherland companies), BEL 20 (Belgium), FTSE MIB (Italy), and OBX 25 (Norway).
Central securities depositories (CSDs) in Denmark, Italy, Norway, and Portugal provide Euronext’s custody and settlement services.
03. Shanghai Stock Exchange (SSE), China
The largest stock market in Asia, the SSE has an MCap of $6.98tn. It was established in 1990. It is a non-profit entity under the purview of the China Securities Regulatory Commission (CSRC). Capital account controls by the Chinese government mean that it is not fully open to foreign investors.
The SSE trades stocks, bonds, derivatives, and funds. Two types of stocks are available on the exchange – ‘A’ shares in the local renminbi yuan and ‘B’ shares in US dollars. As of December 2002, carefully vetted investors are allowed to invest in ‘A’ and ‘B’ shares, with a USD 80bn quota as of 2012.
The SSE’s benchmark index is the SSE Composite, comprising all stocks on the exchange. Other indexes include the SSE 50 Index (a float-adjusted capitalization index of the top 50 stocks) and the SSE 180 Index (same as the SSE 50 but for the top 180 stocks).
02. National Association of Securities Dealers Automated Quotations (NASDAQ), United States of America
This list’s runner-up is the NASDAQ, the world’s first electronically traded stock market. It has an MCap of $19.34tn, listing more than 3000 companies. The world’s greatest tech companies, including Facebook, Apple, Amazon, Google (FAANG), Tesla, Intel, and Microsoft, among many more, are listed on the NASDAQ.
Established in 1971, it trades around $1.26tn every month. Its trading products include stocks, futures, and options. Significantly, the NASDAQ has never listed any “old economy” stalwarts like oil and gas companies.
The Nasdaq Composite is the NASDAQ’s benchmark MCap-weighted index, comprising most of the stocks that are exclusively listed on the exchange. To be listed on the Nasdaq Composite, the stock needs to be common stock, not preferred or exchange-traded funds.
Another notable index is the Nasdaq 100, which only includes the 100 biggest non-financial companies listed on the NASDAQ. These 100 companies make up over 90% of the Nasdaq Composite.
01. New York Stock Exchange (NYSE), United States of America
With an MCap of nearly $24.5tn, the NYSE is the top stock exchange in the world. Established in 1792, the NYSE is the weather vane for all the other stock exchanges of the world. The movement of the NYSE invariably affects trading at other exchanges on the next trading day. The NYSE lists 2400 companies, with most household names being listed there, such as JPMorgan Chase, ExxonMobil, American Express, IBM, McDonald’s, Walmart, and Nike.
The NYSE’s benchmark index is the Dow Jones Industrial Average (DJIA), a 30-stock price-weighted index of 30 prominent stocks. Even with its outsized influence, the DJIA has come under criticism because it does not represent an adequate cross-section of the companies on the NYSE.
Other well-considered indexes include the S&P 500 (tracking 500 of the largest companies in the US) and the NYSE Composite Index (a free-float MCap weighted index covering the common stock on the NYSE).
As you go down the list, you will realize that many of these stock exchanges are only a few billion up or down on each other, apart from 1 and 2, who are multiple times larger than their nearest competitors. 3 through 5 are within a few hundred billion dollars of each other, the same with 6 through 8. It is as good an indicator as any of how and where funds are being spent in creating wealth. The Asian stock exchanges are creeping up the chart, with the SSE being the best among the rest. The SSE’s high ranking is a sign of China’s economic wealth and prowess in spite of capital controls and government interventions. Another optimistic sign is that an ‘upstart’ stock exchange as the 1992-founded NSE has already made the list. The stock exchange is keeping up its reputation of being the primary creator of wealth across the world.