|
 We've all heard of a stock exchange, but not a lot of people understand the differences between the major exchanges. The answer to that question can be found in the very reason that a stock exchange exists in the first place.
Anyone who has traded in stocks understands the concept of a stock exchange, but not a lot of people understand the differences between the major exchanges. For example, why one company might be listed on the New York Stock Exchange and another on the NASDAQ. The answer to that question can be found in the very reason that a stock exchange exists in the first place.
Purpose of a Stock Exchange
When a company makes a decision to raise capital by issuing stock, it is competing with many other companies for investors' money. To maximize demand for its stock, this company needs to decide on which stock exchange it will offer its shares of stock to investors. In general, the bigger the exchange, the better the market, so a company would want to be included in the largest stock exchange possible.
Most stock exchanges have standards that a company needs to meet before they will carry the stock; a smaller number of exchanges have evolved to be niche players - and are less selective. Not all companies will pass the requirements of the NYSE Euronext - but other exchanges will help fill that void.
Major Stock Exchanges
We're going to give you a run down of the largest stock exchanges you'll find in American and throughout the world. Some of these exchanges have real trading floors, while others operate as a virtual stock exchange, relying heavily on sophisticated computer networks.
New York Stock Exchange Euronext
The New York Stock Exchange or NYSE was formed in 1792 by 24 New York City stockbrokers. The NYSE is arguably the oldest and most prestigious stock exchange in the world and trades still take place on the exchange floor. On an average day, nearly $50 billion dollars are traded on this exchange and 1.5 billion shares exchange hands. There are currently around 2,800 companies listed on the exchange worth nearly $20 trillion.
To be listed on the New York Stock Exchange, the company must have in excess of 2,200 shareholders with an average daily trading volume of at least 100,000 shares. Generally, the company must have a total capitalization of $750 million or pretax earnings in excess of $10 million. There are several combinations, but the bottom line is that you need to be either very big or very profitable.
NASDAQ
Until recently every company's goal was to have its stock exchanged on the New York Stock Exchange. That all changed about 10 years ago when NASDAQ became recognized as the most technologically savvy stock exchange in the world. Many of the largest companies in the world - such as Microsoft - now trade on the NASDAQ and for good reason.
Unlike the floor of the NYSE, NASDAQ's network of computers allow for extremely efficient trading - a virtual stock exchange. In October 2004, the NASDAQ surpassed the average trading volume of the NYSE for the first time with an average volume of 1.6 billion shares.
Like the NYSE, the NASDAQ has a matrix approach to its listing standards. Generally, a company must have issued around 1,000,000 shares of stock valued at $10 million or more.
American Stock Exchange
The third largest stock exchange in the world is the American Stock Exchange or Amex. From the very beginning, the Amex filled a niche roll as it was the original exchange for companies that did not meet the standards of the NYSE. Today, the NASDAQ fills that role and in 1998 the owners of NASDAQ purchased the American Stock Exchange.
The niche role of the American Stock Exchange has evolved and today it specializes in derivatives and options. On a typical day 50 million shares exchange hands and there are around 1,600 companies listed on the Amex.
London Stock Exchange
The London Stock Exchange, or LSE, was formed around 300 years ago and today lists about 3,300 companies from 60 countries. Many large US companies that are listed on American exchanges also list on the London Stock Exchange - General Electric is one example.
The London Stock Exchange is much smaller than its American counterparts with average trading volume of around 250,000 shares. In 2005, there were roughly 63 million trades involving 2.5 trillion British Pounds.
Toronto Stock Exchange
The Toronto Stock Exchange, or TSE, is owned by TSX group, which also owns the TSX Venture Exchange, an important exchange for electricity and natural gas contracts. The Toronto Stock Exchange or TSX is thought to have grown from an association of brokers back in 1852. Unfortunately, there are no official records of this group's transactions.
In 1934, the Toronto Stock Exchange merged with the Standard Stock and Mining Exchange and the merged markets adopted the Toronto Stock Exchange name. In 1997, the TSE's closed its trading floor, making it the largest stock exchange in North America to choose a floorless, electronic / virtual trading environment.
Some of the other key statistics of the Toronto Stock Exchange include the facts that over 3,800 issuers listed on the exchange with a market capitalization of nearly $1.8 trillion. On an average day a little over 340,000 transactions are conducted on the Toronto Stock Exchange involving around $5.6 billion.
Australian Stock Exchange
The history of the Australian Stock Exchange, or ASX, starts with the six capital city exchanges that were established in the late 1800s. From 1903 until 1937, these state stock exchanges began meeting on an informal basis. By 1936, Sydney had taken the lead in formalizing the association and in 1937 the Australian Associated Stock Exchanges (AASE) was established.
On April 1, 1987 the Australian Parliament passed legislation forming the Australian Stock Exchange Limited (ASX). Forming a national stock exchange formally brought together the six independent stock exchanges operating in the capital cities.
Approximately 1,785 companies are traded on the ASX with an average trading value of $31,100 AUD and an average price per share of around $3.35. These same companies had a combined market capitalization of $1.6 trillion (AUD) as of December 2007.
Bombay Stock Exchange
The Bombay Stock Exchange (BSE), also known as the Stock Exchange Mumbai, is one of the oldest stock exchanges in all of Asia dating back to 1875 when it was known as the Native Share and Stock Brokers Association.
The exchange is home to about 4,900 listed companies with a total market capitalization of around 63 trillion Rupees or $1.6 trillion as of December 2007. The BSE is also one of the busiest stock exchanges in the world, currently ranking around number five in terms of annual transactions.
Tokyo Stock Exchange
This history of the Tokyo Stock Exchange, or TSE, dates back to the 1870's when a securities system was established in Japan and public negotiating for bonds first began. The Tokyo Stock Exchange Co., LTD was established on May 15, 1878 and trading on the exchange began in June of that same year.
The Tokyo Stock Exchange is one of the largest stock exchanges in all of Asia with over 1.5 billion shares exchanging hands each trading day. There are approximately 2,400 listed companies on the exchange with a total market capitalization of nearly 670 trillion yen. Nearly 510 billion shares of stock are exchanged annually on the TSE.
About the Author - Stock Exchange
Copyright © 2004 - 2007 Money-Zine.com
Stock Market Resources on the Web |
Home 
