This page is dedicated to everything related to the stock market. It aims to answer all the questions you might have related to stock markets and stock exchanges, and we hope that it will give you a better understanding of how stock markets operate. It is important that you have this knowledge before you start investing to avoid costly mistakes and unnecessary losses.
We will answer questions about the difference between a stock market and a stock exchange and explain who regulates the market. We will also take a look at the world’s stock markets and the largest and most influential stock exchanges. In addition, we’ll briefly explain how a stock market operates and why there are market opening times.
Keep in mind that this is a guide with general information and that we offer in-depth guides about most of the subjects covered here. You will find links to related guides where it’s needed.
What is a Stock Market?
A stock market, sometimes called a sharemarket, is a collection of markets and exchanges where stocks and shares are traded and companies are publicly listed. Unlike other markets such as the forex market, stock markets are made up from actual physical places and not decentralized systems. That means that every stock exchange has a headquarter or an “exchange floor,” although the size of these marketplaces are on a steady decline and more and more of the trading is being integrated into online software.
Generally speaking, stock markets are categorized based on geographic location, meaning different regions have their own stock market with multiple exchanges. And depending on the context, sharemarkets can shift in size and shape. For example, the US stock market is a nation-based stock market but the European stock market, on the other hand, consists of exchanges from several different nations.
In today’s society, the stock markets play a vital role in the upkeep of our economy. Similar to how the forex market helps to stabilize and run the world’s currencies, the currenct stock market helps to stabilize and run the world’s economy. Stock markets also tend to reflect a region’s economic status, a strong economy means a strong stock market and vice versa.
What is a Stock Exchange?
There is a classical picture that’s usually shown when the media discusses stock markets. These pictures show a bunch of stockbrokers squeezed in around big boards with stock prices – trading panels – yelling at each other trying to sell and buy stocks. Usually, they are dressed in suits with or without blue jackets with the stock exchange’s name on the back. Those pictures are taken at stock exchanges.
A stock exchange is where the actual trading takes place and depending on the exchange, stocks, bonds, indices, and other securities can be traded on it.
Note that when most people speak of stock markets they are actually referring to stock exchanges even though there are vital differences.
The History of Stock Markets
In order to examine the history of stock markets, we have to clarify when stock exchanges were first introduced, which is a subject that experts have not been able to agree on.
Some claim that the first stock markets can be traced as far back as ancient Rome and that people in ancient Rome could buy shares of government projects such as the building of temples; hence the first sharemarket. There are even scripts dating several thousand years back that mention prices for different shares in the Roman Empire.
Most experts agree that the first formal stock exchange wasn’t established until the late 1500s and that the Frankfurt Stock Exchange was one of the first. In the early 1600s, the Dutch East India Company (VOC) was founded and that became the first company in history to offer shares to the public. Before the VOC, shares had been very exclusive and often sold through exchanges but to smaller groups of high ranking members of society.
In England, public stock trading started in the late 1600s when King William III founded the Bank of England which started issuing joint-stock companies that helped fund England’s wars. The Royal Stock exchange was first created in the late 1500s and later evolved to become the London Stock Exchange.
Different Stock Markets Today and Their Exchanges
We’ve already mentioned that there are many different stock markets and that they are based on geographics. In order to explain this further and give you a better idea of how exchanges operate and where they are located, we have listed some of the largest and most influential exchanges in the world. There are, of course, many more exchanges and markets than this, but these are the most relevant for any trader.
Note that in the cases where the size of the exchanges are listed it’s based on information from late 2017 and might have changed.
Wall Street Stock Market
The two largest North American stock exchanges are both located in New York City and are often referred to as the Wall Street Stock Exchanges. They also happen to be the two largest exchanges in the world and where most of the world’s leading companies are listed, which naturally means that this is where a lot of your stock trading will take place.
- The New York Stock Exchange (NYSE) is the largest stock exchange in the world based on total market cap. The NYSE is probably the most iconic exchange in the world and several of the world’s largest companies are listed on it such as Walmart, General Motors, IBM, and Berkshire Hathaway. The NYSE also includes the Euronext, meaning it includes some of the biggest companies in both the US and Europe.
- Nasdaq is the second largest exchange in the world and it is also located in New York. Nasdaq mostly focuses on tech companies and usually has faster moving and more volatile stocks listed such as Google, Amazon, Apple, Netflix, and Tesla. Based on the number of listings, the Nasdaq is larger than the NYSE.
American Stock Market
American stock market stretches from the north in Canada all the way down to southern South America. There are several exchanges and market spread out on these two continents and below are some of the most influential ones.
- The Toronto Stock Exchange is the ninth largest exchange in the world and the biggest one in Canada, which also qualifies it as one of the leading exchanges in the Americas.
- The Buenos Aires Stock Exchange has close to 2,000 listings which makes it one of the leading stock exchanges in the South American stock market. The exchange is located in Buenos Aires, Argentina and mostly handles all Argentinian companies and their shares.
- The Sao Paulo Stock Exchange (B3) is de facto the largest stock exchange in the South American stock market based on market cap. Internationally it ranks in the top 20 list but due to Brazil’s struggling economy, the market is known to fluctuate a lot.
European Stock Market
The European stock market is one of the most influential in the world with several of the largest and oldest exchanges. This market also consists of several of the most flourishing markets with innovative and creative companies.
- The London Stock Exchange was originally founded as the Royal Exchange and is one of the oldest exchanges in the world. The London Stock Exchange also runs the FTSE indices which are some of the most important indices on the international market.
- Euronext is the European Union’s own stock exchange and it offers everything from shares and bonds to indices and even a forex platform. Euronext is also a part of the NYSE brand and is considered the fifth largest exchange in the world on its own, but the largest when combined with NYSE.
- Nasdaq Nordic has its headquarters in Stockholm and includes the Scandinavian and Baltic stock exchanges as well as the Armenian stock exchange. Since 2007, Nasdaq Nordic has been a subsidiary of Nasdaq and one of the major exchanges in the world.
Asian Stock Market
If you combine all the Asian exchanges, the Asian stock market is the largest in the world and it’s the market with the most exchanges, 7 in total, making it to the top 20 list of the world’s largest exchanges. The Asian stock market includes some of the largest tech, oil, and agriculture companies in the world.
- Tokyo Exchange Group ranks as the third largest exchange after NYSE and Nasdaq. Its headquarters are in Tokyo’s financial district and it includes the Tokyo Stock Exchange and the Osaka Stock Exchange.
- The Shanghai Stock Exchange is the fourth largest exchange in the world and the largest one in China where three of the world’s 10 largest exchanges are located. Although only two of the exchanges are actually located inside the People’s Republic of China – the third one is the Hong Kong stock exchange.
- The Bombay Stock Exchange is one of two exchanges in Mumbai, India, and it’s the first exchange in Asia, founded by the English in 1875. The Bombay Exchange is the second largest in India after the National Stock Exchange of India which is also located in Mumbai.
- The Indonesian Stock Exchange has its headquarter in central Jakarta and is considered to be one of the oldest exchanges in Asia. This exchange mainly focuses on companies in the oil and agriculture industries.
African Stock Market
The African stock market is a small market with a few exchanges compared to the size and population. However, that does not mean that there is no value to be found, especially in the southern parts of the continent.
- The Johannesburg Stock Exchange (JSE limited) was the only African stock exchange to make it to the 2017 top 20 list with 388 listings. It also happens to be the oldest exchange in Africa, founded in 1887.
How Do You Access a Stock Market?
There are a couple of ways to access stock markets and start trading stocks. The most common way of investing in stocks is by using a professional stockbroker that charges a fee for every trade you conduct. Stockbrokers offer different features and some might even help you with strategies and tips. In certain cases, you can let stockbrokers create specialized portfolios with a collection of stocks that they expect to perform well. Brokers also usually want you to open a margin account where you trade using loans from the brokerage firm. This type of trading is riskier but boasts higher yields. Cash accounts are safer since you only trade with money you actually have.
Some companies also let you buy the stock straight from the company through different payment plans with requirements to invest certain amounts or pay a deposit.
Another way of investing in stocks is through CFD brokers that let you speculate on the stock price instead of buying the stock. This type of trading is also done using margins and it lets you avoid the actual exchange. Below you’ll find some of the best CFD brokers on the market.
Stock Market Opening Hours
Before you invest, you need to be aware that all stock exchanges have certain opening hours that normally run during regular business hours where the exchange is located. Therefore, the opening hours of stock exchanges vary and you need to know at what time certain stocks are available before you start trading.
The reason why exchanges have opening hours is to give brokers and traders a break from the trading, but also to run maintenance on the systems that are used. Also, back in the days when the first exchanges opened people worked for a set amount of hours every day and would not be available 24/7. Today, with access to the internet, exchanges could be open at all times but that is not the case and opening hours are honored globally.
Avoid Stock Market Opening Hours
Traditionally, there are three ways to easily avoid the stock market opening hours. You can either trade futures on indices, options, or trade CFDs. Futures are not available on specific stocks but instead on most indices, and it’s a good way to trade outside of opening hours. Options and CFDs are available on most underlying assets and are available all day.
Who Regulates the Stock Market Today?
All types of stock trading are regulated and controlled in order to protect companies, shareholders, exchanges, and everyone else involved. Who and what regulates the markets depends on the country, but there is no unregulated stock market in the world. The actual regulation and laws also differ but generally speaking they require exchanges to be audited, transactions to be recorded and checked, brokers to acquire licenses, and so forth.
All countries have their own regulatory bodies and in most cases, there is more than one government body that oversees regulation.
For example, in the United States, there is the Securities and Exchange Commision (SEC), a governmental body that regulates the stock market on a federal level, as well as the Financial Industry Regulatory Authority (FINRA) that is an independent organization with similar tasks. There is also the Federal Reserve System (the Fed) and the Commodity and Futures Trading Commission (CFTC), that oversee different markets and securities. On top of that, there are state regulators that regulate on a state-based level.
In England, there are two main agencies that regulate the stock market. It the UK Listing Authority (UKLA) and the Financial Conduct Authority (FCA).
Within the European Union, each country has their own regulatory agencies but there are a couple of all-inclusive ones. The major stock exchange regulator in the EU is the European Securities and Markets Authority (ESMA). There are also smaller agencies that issue licenses for brokers on different markets such as the Cyprus Securities and Exchange Commission (CySEC) as well as the FCA. More importantly, there is a regulatory directive called the Markets in Financial Instruments Directive (MiFID), that includes all European Union member states and regulates all types of trading including stocks.
Stock Market Summary
Let us summarize the term stock market. A stock market is a collection of stock exchanges operating within a geographical location such as a country or a continent, for example, the United States, Europe, or England. Stock exchanges list companies that offer shares to private investors, but in some cases also sell other securities such as bonds, futures, and indices.
In order to trade stocks today, you need to figure out on what market the company you want to invest in is listed and then buy the stock from that specific exchange. It is most common to use a stockbroker to buy stocks but there are certain ways you can buy shares on your own straight from the company.
Stock markets today have become so prominent in the last few centuries that they are now an important part of our global economy and also help to stabilize the economy and growth. In fact, the economy is reflected by the health of the stock market, a strong stock market indicates a strong economy and vice versa.