Why are There Different Stock Exchanges Around the World?


The different stock exchanges around the world play host to over 630,000 publicly traded companies. They span across 4 continents, and 30 countries, and hold a combined $70.75 Trillion. There are currently 60 stocks exchanges in the world, however only 25 of those are major exchanges, and only 16 have a market capitalisation of $1 Trillion or more.

The reason the world has many different stock exchanges is differentiation. Different exchanges have different entry requirements, by having only one exchange, the bar for entry would be so high many companies would miss out. It is also worth noting that, many companies only wish to list themselves in their country of origin. But companies can also list on multiple exchanges in multiple countries to reach a wider range of investors.

We’ve all heard of the common ones like the New York Stock Exchange (NYSE), the NASDAQ, and maybe the Hong Kong Stock Exchange (HKSE). But these are all the major exchanges in the world:

Stock ExchangeCountryMarket PlaceMarket Capitalisation (USD Billion)
New York Stock Exchange🇺🇸 United StatesNew York City$22,923
The NASDAQ🇺🇸 United StatesNew York City$10,857
Japan Exchange Group🇯🇵 JapanTokyo, Osaka$5,679
London Stock Exchange🇬🇧 United KingdomLondon$4,590
Shanghai Stock Exchange🇨🇳 ChinaShanghai$4,026
Hong Kong Stock Exchange🇭🇰 Hong KongHong Kong$3,936
Euronext🇪🇺 European UnionAmsterdam, Brussels, Dublin, Lisbon, Oslo, Paris$3,927
Toronto Stock Exchange🇨🇦 CanadaToronto$3,256
Shenzhen Stock Exchange🇨🇳 ChinaShenzhen$2,504
Bombay Stock Exchange🇮🇳 IndiaMumbai$2,056
National Stock Exchange🇮🇳 IndiaMumai$2,030
Deutsche Börse🇩🇪 GermanyFrankfurt$1,864
SIX Swiss Exchange🇨🇭 SwitzerlandZurich$1,523
Korea Exchange🇰🇷 South KoreaSeoul, Busan$1,463
NASDAQ Nordic Exchanges (European NASDAQ)🇪🇺 European CountriesCopenhagen, Stockholm, Helsinki, Tallinn, Riga, Vilnius, Iceland, Yerevan$1,372
Australian Securities Exchange🇦🇺 AustraliaSydney$1,328
Taiwan Stock Exchange🇹🇼 TaiwanTaipei$966
B3🇧🇷 BrazilSão Paulo$938
JSE🇿🇦 South AfricaJohannesburg$894
Bolsas y Mercados Españoles🇪🇸 SpainMadrid$764
Singapore Exchange🇸🇬 SingaporeSingapore$787
Moscow Exchange🇷🇺 RussiaMoscow$619
Stock Exchange of Thailand🇹🇭 ThailandBangkok$549
Mexican Stock Exchange🇲🇽 MexicoMexico City$530
Indonesia Stock Exchange🇮🇩 IndonesiaJakarta$521
Market Cap correct as of March 2021

The other exchanges not included on this list are not major exchanges. They are classed as Over-The-Counter exchanges (OTC’s). This is where the companies that don’t meet the requirements to be listed on major exchanges sit, they are typically classed as Penny Stocks.

These exchanges, as well as the OTC exchanges exist so buyers can diversify their holdings by owning company stock from multiple countries and sectors, as well as being exposed to a world economy rather than just a single nations.

Why are there so many exchanges 900x900

What are Stock Exchanges?

A stock exchange is a little bit like the farmers market… Each farmer has their stall at the market, and buyers come along to get their product. Buyers come to the farmers market because they know this is the place to buy to best produce, and farmers participate because this is where the buyers are, the market is just the middleman.

Both the farmers and the buyers benefit from being a part of the market. A stock exchange is exactly the same, just swap the farmers for huge corporations, and the groceries for shares. The stock exchange connects buyers with sellers, that’s the ins and outs of any exchange.

The exchanges you need to be aware of are:

  • Auction Exchanges
  • Electronic Exchanges
  • OTC Markets
  • Major Commodity Exchanges
  • Futures Exchanges

All exchanges work in the same way, only with different types of securities on offer to buy.

How do Stock Exchanges Work?

In the old days you would have a team of brokers working directly on the exchange floor, buying and selling listed stocks for members of the public. You’ll see them in movies… The guys on the phone shouting at the investor to buy or sell.

More recently, in the age of technology, exchanges have become more automated. Traders and brokers can contact investors directly via online platforms. When an order is placed online, the broker makes the investment on the exchange via the ‘exchange network’.

Many exchanges don’t want to throw away their past. Stock exchanges like the NYSE still employ physical trading on the exchange floor, however they also use electronic trading to allow for a wider market to use their platforms.

What’s the Difference Between a Stock Exchange and a Stock Market?

A Stock Market is… The combination of buyers and sellers who trade stocks. They are usually in competition, and the more money involved, the more the market is worth.

A Stock Exchange is… The infrastructure that is used by said traders which deals with the specific buying and selling of assets. Companies compete on the exchange to be listed.

As you will tell, the stock market is where investors compete, and the exchange is where companies compete.

Investors are competing to make the most money in the market… Whereas, companies are competing to gain the most investment on the exchange. The two are not mutually exclusive, because when a company competes on the exchange to build investment hype… The market will determine how much the ‘hype’ is worth.

One last difference is… The stock market is a broad term used to depict every company that is publicly traded. Whereas an exchange is an organisation tool to split specific companies into relevant categories based on geography, size, and in some cases industry.

Why are there Different Stock Exchanges in the First Place?

This question baffles people all across the globe. Why would anyone think more than one exchange is a good idea? Why not just keep them all in one place? Well… There’s a few reasons why.

  1. Currency: With the multitude of currencies floating across the world, we need to accommodate investors trading in different currencies. And reduce the errors due to changing exchange rates.
  2. Tax Implications: By companies being registered in different countries, their profits are taxed differently. Tax is also calculated differently for the investors.
  3. Diversity: The degree of acceptance in each exchange is different, allowing a more diverse marketplace full of both established sturdy companies, and new flamboyant start ups.
  4. Shear Volume: Also, you have to think… There are 630,000 publicly traded companies throughout the world. It would be utter chaos if they were all managed under one exchange.

Let’s begin with the first issue…

#1. Currency

A stock exchange ‘can’ handle more than one currency, but running an exchange with more than one currency would create its own problems.

  • The currency exchange rate would need to be calculated instantly when an order is placed or stock is sold. Because there is a minor delay from order to execute for every exchange, it would cause in incorrect values, purchase prices, and profits for investors.
  • It is uncommon for equities to offer shares in more than one currency. An American company who solely deals in Dollars will only sell shares in Dollar amounts. If shares for one company are dealt in multiple currencies, it would cause each share to be a different value because of the currency exchange rates.

These reasons are why companies only trade on exchanges in their incorporated country. However, what can happen is… A company can file for a dual-listing which is where a company will be floated on more than one exchange, and in more than one currency.

A Dual-Listing is completed to increase liquidity in the stock, which increases the supply of shares on the market to fuel further demand. The share prices react the same way on both exchanges, the only difference is that one is in Dollars and the other might be in Euros.

#2. Tax Implications for the Company & Investors

Different countries have different tax rules for both companies and investors, this is nothing new. For companies, this is not too much of an issue… They will pay tax in whichever country they trade in.

But for investors, tax can pose an issue when trading on multiple exchanges.

  • In the UK, investors pay Capital Gains tax at specific percentages. Companies pay Corporation tax.

If all companies where listed on an exchange in the UK, all companies would then be subject to this Corporation tax, no matter where they are based. This would cause other countries to suffer by not being able to host publicly traded companies, and we would see a failing global economy.

For investors, it may also cause tax implications for assets sold abroad, currency conversion rates, and foreign capital gains. Also, foreign markets can be harder to predict.

#3. Diversity of Assets Available

If we had one exchange in the world, the acceptance criteria would be so extensive, and so difficult to comply with it would cause a lot of the smaller capped companies to fall out of the market. The choices we can make would be stifled by a lack of opportunity.

Everyone can say, why don’t we just adopt the rules of the easiest exchange to get listed on? Unfortunately this would cause poorly informed investors to have access to horrible penny stocks and false companies which have badly represented trading backgrounds.

The regulations for the major exchanges are in place to protect investors from companies that are poorly run, too volatile, and that have CEOs trying to make quick money from investors.

Diversity is what allows the market to be competive and grow, without the little companies (on minor exchanges) growing into large corporations (on major exchanges) we would never get stocks like Apple or Amazon. Companies require the minor exchanges to gather funding to grow into major exchange material.

#4. Shear Volume of Companies & Investors

The NYSE hosts over 700 million share deals each day, which is the largest of any other exchange. That is a lot to get through in one day… There is a reason why the servers for the NYSE need to be manually serviced and cooled everyday.

The algorithms in place to run the NYSE are extensive and constantly updated. The manpower and energy used in maintaining the workings of the NYSE is undefinable.

Imagine one single stock exchange managing these 700 million share deals, then add 5.73 billion more… That’s right, the total amount of share deals occurring in a single day is 6.43 billion orders. And this number is increasing…

  • In 2014 the daily orders stood at 6.29 billion, so it has increased by over 130 million in 6 years.

There is not a system, algorithm, or computer that can handle this much volume in one day. Even if we had 1,000 computers running 1,000 algorithms we would have delays which could impact the current share price of a stock, which could lead to millions in lost investment for both companies and investors.

These are just a few reasons why we need different stock exchanges in the world. If it’s not currency conversion and tax implications… It’s a lack of diversity and a breakdown of the market from shear volume.

Why are there Different Stock Exchanges in the Same Country?

This comes down to the simplest of rules… Restrictions keep the stock market fair.

To make the stock market a safer place for investors, some countries will have multiple exchanges which host different companies. An example of this is the New York Stock Exchange (NYSE) and the NASDAQ, both are based in the USA and both deal in Dollars.

Both the NYSE and NASDAQ have different entry requirements. Making companies on each exchange different. Whether it be market cap, earnings, amount of employees, these rules are in place to protect the average investor from small companies that see massive volatilty.

The minor exchanges in America host the penny stocks, and the major exchanges host some of the largest companies in the world. Because average investors will find it difficult to invest on the minor or OTC exchanges, it protects them from the smaller more risky companies. By only being able on major exchanges, it keeps them somewhat in control of their money.

If each country had one exchange, the penny stocks would get as much exposure as the likes of Apple, which could lead to massive losses for investors. As penny stocks are not a tightly regulated by the SEC.

What do these Different Stock Exchanges Offer to Investors?

Different stock exchanges offer diversity above anything else to investors.

Because every stock exchange is different, they offer different types of companies. The NYSE offers some of the biggest most stable companies in the world for investors to buy into, so this is the exchange investors use for long term, low risk investments. However, smaller exchanges such as an OTC exchange, offer small cap high risk companies for investors to speculate with.

Another way investors can diversify through different exchanges, is by investing internationally.

International marketplaces expose investors to multiple economies, some good, and some bad, but all volatile. I believe every investor should dabble in foreign markets, as the USA is not the only growing economy in the world. China, Japan, the UK, they all have growing economies, with a lot of companies breaking into huge profits. To assume US companies are the only ones that provide profit for investors is insane, otherwise, why would any other country have a stock exchange?

But there is always one question that investors ask… Which stock exchange performs the best?

Which Stock Market has Performed the Best for Investors?

With the invention of ETFs and Mutual funds investors can be exposed to an entire stock exchange with one stock. Fund managers build indexes that follow stock exchanges, so your investment follows the trend of the companies in the exchange, so if you pick the correct exchange, you could make a solid investment that grows as the countries economy.

If we look at all companies across the last 20 years, we can find out which companies how performed the best, then we will be able to determine which exchange performed the best based on the amount of profitable companies listed on the specific exchanges.

Top 15 Performing Companies Since 2001

CompanyTotal ReturnStock Exchange
Netflix (NFLX)+ 26,858 %NASDAQ
Credit Acceptance Corp (CACC)+ 12,041 %NASDAQ
Monster Beverage Corp (MNST)+ 10,417 %NASDAQ
Tractor Supply Company (TSCO)+ 9,818 %NASDAQ
Reynolds American Inc. (RAI)+ 8,233 %London Stock Exchange
NVR Inc. (NVR)+ 7,687 %New York Stock Exchange
Apple Inc. (AAPL)+ 6,770 %NASDAQ
IDEXX Laboratories Inc. (IDXX)+ 6,624 %NASDAQ
Ventas Inc. (VTR)+ 6,149 %New York Stock Exchange
Mastercard Inc. (MA)+ 5,910 %New York Stock Exchange
Intuitive Surgical Inc. (ISRG)+ 5,861 %NASDAQ
Ross Stores Inc. (ROST)+ 5,706 %NASDAQ
Illumina Inc. (ILMN)+ 5,538 %NASDAQ
Ansys Inc. (ANSS)+ 5,023 %NASDAQ
Pool Corporation (POOL)+ 4,749 %NASDAQ
Figures Collected from 2001 – 2021

With the tech boom of the last 20 years, it is no surprise that the NASDAQ has the most high performing companies listed on its exchange.

This is not to say that the NASDAQ is the only stock exchange to make huge returns, there are others around the world that have performed well. However, the evidence leads to saying that the companies on the NASDAQ, have performed the best over the last 20 years.

NASDAQ Index Funds

The most well know index fund that follows the NASDAQ is the Invesco QQQ ETF. You can see how it has performed against the NASDAQ and the S&P500 in the graph below:

Invesco QQQ Performance
Invesco QQQ Home Page

There are other index funds that follow other exchanges, but over the past 15 to 20 years, the NASDAQ has produced the highest level of asset appreciation for investors. If you invested $10,000 in 2011 with the Invesco QQQ ETF, you would now have over $62,000 in your investment account.

What does it Take to be Listed on one of the Major Stock Exchanges?

To make it onto one of the big major exchanges such as the London Stock Exchange, you need to meet certain ‘listing requirements’ as set by the exchange chairman and board members.

Understanding Listing Requirements

Listing requirements are a set of basic conditions a company must meet before being able to float shares on an exchange such as the NYSE, NASDAQ, London Stock Exchange and etc.

Even small OTC exchanges have listing requirements. It is to keep the marketplace competitive, so smaller companies can still compete with the giants of commerce.

Companies can fit multiple listing requirements for multiple exchanges, however they will tend to stick to exchanges that are either closest to HQ, or of the highest reputation.

What are the Listing Requirements for Major Exchanges?

Some main listing requirements for stocks on the major exchanges include:

  • Market Value.
  • Liquidity of Shares (Number of shares issued).
  • Sufficient Financial Track Record.
  • Some even declare that a certain percentage of your turnover must be from regular business activity.

For example, the listing requirements for the NYSE are:

  • 1.1 Million Publicly Traded Shares Outstanding and Available.
  • A Market Value of at least $100 Million.

The NASDAQ requires 1.25 million available shares, with a market value of $45 million.

How OTC Stocks Enter Major Exchanges

This part is simple… As soon as an OTC (over the counter) stock reaches the required market value and outstanding shares, it will apply to be let on the major exchange of its choice. Known as penny stocks, these OTC stocks usually trade for under $5 per share.

You can find out more on this on our next article: Can Penny Stocks Become Regular Stocks?

Summary

To sum up…

The reason the world has so many different exchanges is to keep the market active and available to all companies no matter the size or location. It also allows investors to reach a wider range of stocks, some speculative, and some solid.

Across these 25 major exchanges, we hold over $70.75 trillion. This would not be possible if the stock market was concentrated in one country, or only allowed a specific set of companies in. 630,000 companies are involved in our global marketplace, and I hope it grows to even more in the future with the help from a set of diverse exchanges.

Chris Race

I am an accountant from the U.K. specialising in Management Accounting, Personal & Business Tax, Financial Analysis, and Wealth Management. My passion for learning is what lead me to creating this blog. Stock market investing has always been a interest of mine, and since I was 18 years old... This interest has become a source of income for me and my family.

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