There is more to stock markets than just buying and selling stocks. They serve as an essential part of an economy and perform several key functions in capital markets.
According to the latest reports, there are about 60 stock exchanges worldwide. The performance of the stock exchanges is aligned with the performance of respective economies since they are indicators of how well the respective economies are performing and indicates the expansion of the economy. They help raise capital to drive innovation, fund growth, create jobs, and vary in their sizes in terms of their total market capitalization and the value of the listed companies.
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The prominent bourses include NYSE, NASDAQ, and the Shanghai Stock Exchange and reflect the economic dominance of their respective countries globally. The tiny ones consist of stock exchanges in Malta, Cyprus, and Bermuda but signify their importance to the national economy despite their smaller size. Interestingly, some countries like Afghanistan and North Korea do not have stock markets.
A stock market ensures that there is adequate liquidity in the market. It helps companies raise capital for investment and expansion. The size of a stock exchange is essential since the more significant the market capitalization, the more prominent role it plays in the country’s overall economic growth and boosts the underlying fundamentals.
Here is a list of the five largest stock exchanges in the world based on market capitalization:
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1. New York Stock Exchange – NYSE
The big one takes the lead. The New York Stock Exchange (NYSE) is an American stock exchange based in New York. With a total market capitalization of US$ 28.3 trillion as of January this year, it is the world’s largest equities exchange. It is one of the most popular, widely used, and most followed stock indices globally and is closely tracked by people across the globe to gauge how the market is performing.
NYSE has more than 2,400 listed companies, including many blue-chip companies like Berkshire Hathaway, Coca-Cola, Johnson & Johnson, JPMorgan Chase, ExxonMobil, etc. The NYSE hosts more than 80% of the S&P 500 and 70 of the biggest corporations in the world. The NYSE operates like an auction market where buyers and sellers simultaneously make competing bids and offers. It is perceived to be home to well-established companies and more stable stocks.
The NYSE is the only exchange globally that has an active trading floor where the latest technology and human expertise are harnessed together to drive the world’s largest stock market.
The loud ringing of NYSE’s podium bell signals the opening or closing of the day’s trading and symbolizes free enterprise and ideas that continue to change the world.
The National Association of Securities Dealers Automatic Quotation System, or NASDAQ, is the second-largest stock exchange. The NASDAQ is based in the US and is credited with transforming the financial markets by introducing the world’s first electronic stock market. Before that, trading was carried out on trading floors. The introduction of computerized systems facilitated stock trading through an automated network. Though fully automated, it still owns a physical trading floor in New York City.
The NASDAQ has a total listed market capitalization of US$24.56 trillion and has more than 3,700 securities, including Apple, Microsoft, and Google, listed as of early 2022. It is home to technology and innovation stocks and newer businesses that are more growth-oriented and potentially more volatile. As against NYSE, the NASDAQ is a dealer market, where participants buy and sell stocks through a dealer.
3. Shanghai Stock Exchange
The Shanghai Stock Exchange (SSE) is the biggest stock exchange in Asia and the world’s third-largest. It is also the largest stock exchange in China. The total value of all shares traded on the SSE is US$8.15 trillion. Compared to the US stock markets that are centuries old, the Chinese bourses are comparatively new — just a few decades old. The number of listed companies on the SSE stands at 2,037. Unlike the US stock markets, the Chinese bourses are not heavily connected to the economy, and retail investors play a dominant role.
The Euronext is the largest pan-European stock exchange connecting seven national economies. It provides access to markets in Belgium, France, Ireland, Italy, Norway, Portugal, and the Netherlands. Companies can choose their market and point of entry while listing on Euronext. It has a total market capitalization of US$7.33 trillion with 1,900 listed companies.
5. Japan Exchange Group
The Japan Exchange Group (JPX) is based in Tokyo and operates multiple financial instruments exchange markets. The JPX is a holding company formed by the merger of the Tokyo Stock Exchange and the Osaka Securities Exchange. It has a market capitalization of US$6.54 trillion and has 3,784 listed companies. It is home to some Japanese giants like Toyota, Suzuki, Honda, Sony, and Mitsubishi, which have a global presence. Two of the popular indices for the JPX are Tokyo Stock Price Index or TOPIX and Nikkei 225.