Stock Exchanges: NYSE, NASDAQ, and Beyond

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Stock Exchanges: NYSE, NASDAQ, and Beyond

Stock Exchanges: NYSE, NASDAQ, and Beyond

Summary

  • The United States hosts the two largest stock exchanges in the world by market capitalisation: the New York Stock Exchange (NYSE) and the Nasdaq.

  • There are over a hundred stock exchanges worldwide, and together, they have a market capitalisation of over $100 trillion.

  • The most popular stock exchanges, NYSE and Nasdaq, do not operate similarly. NYSE is an auction market where designated market makers determine stock prices & trades. Nasdaq is popularly known as an electronic marketplace for trading securities like bonds, and securities are traded through parties called dealers.

Table of Contents

Introduction

Stock exchanges are platforms where investors and traders can trade shares of companies and other financial assets.

They keep the global economy running by facilitating capital information, price discovery, and liquidity.

It is well known that the U.S. hosts the two largest stock exchanges globally by market capitalisation: the New York Stock Exchange (NYSE), and the Nasdaq.

Together, they account for nearly 60 percent of world stocks. However, many other stock exchanges across different regions and sectors offer diverse opportunities and challenges for investors.

What is a Stock Exchange?

Definition: A stock exchange is a place where people buy and sell ownership shares in companies – it’s like a marketplace for stocks.

Companies list their shares on an exchange to raise money for growth, and investors can buy those shares to own a piece of the company.

Investors can sell their shares on the exchange itself, which helps set the value of the shares based on supply and demand.

How Does it Work?

The stock exchange works straightforwardly. As a first-time trader, it cannot be effortless, but once you have gotten some experience, it gets better.

Investor Participation

Individuals and institutions, like pension funds and mutual funds, participate in the stock market to buy ownership shares of companies.

Listed Companies

Companies that want to raise capital for growth and operations issue shares, making them publicly traded. These shares are divided into smaller units called stocks.

Stock Exchanges

Stock exchanges, like the New York Stock Exchange (NYSE) or NASDAQ, provide platforms for trading these stocks: buyers and sellers come together here.

Order Placement

Investors place orders to buy or sell stocks through brokers or online trading platforms. These orders specify the stock, quantity, and price.

Matching Buyers and Sellers

Stock exchanges match buy and sell orders. When a buyer’s bid price matches a seller’s ask price, a trade occurs.

Price Determination

Stock prices change continuously throughout the trading day based on supply and demand. Positive news or investor sentiment can drive prices up, while negative information can lead to declines.

Market Indexes

Market indexes, like the S&P 500 or Dow Jones Industrial Average, track the performance of groups of stocks, giving investors an idea of the overall market’s health.

Investor Goals

Each investor has specific goals that depend on their short/long-term vision. Some might aim for capital appreciation (buying low and selling high), or income (collecting dividends).

Risks

Investing in stocks is considered risky, as it all depends on the volatility of the markets. Markets are usually affected by economic conditions and global events, which also affects the price of stocks.

Long-Term Investment

Many investors adopt a long-term perspective, believing that, over time, the stock market tends to rise despite short-term fluctuations.

Regulation

Government entities, like the Securities and Exchange Commission (SEC) in the United States, regulate the stock market to ensure transparency and protect investors.

Top Stock Exchanges

There are over a hundred stock exchanges currently in the world, some more popular than others.

Here’s the top ten stock exchanges globally:

NYSE

The New York Stock Exchange (NYSE) is one of the world’s largest and oldest stock exchanges, located in New York City, USA. It boasts a market capitalisation of over $22.649 trillion as of January 2023, making it a pivotal player in the global financial landscape.

Established in 1792, the NYSE has a rich history spanning two centuries. It began when 24 stockbrokers and merchants signed the Buttonwood Agreement, laying the foundation for organised trading in the United States.

Over time, it has evolved into a dynamic marketplace, witnessing significant milestones, including the introduction of electronic trading in 2006.

Situated on Wall Street, its opening bell ritual symbolises the opening of the trading day, attended by executives of companies listed on the exchange, creating a tradition known worldwide.

The NYSE hosts various companies from various sectors, including well-known giants like Apple, Microsoft, and Johnson & Johnson. These companies collectively represent a significant portion of the world’s economy, reflecting the exchange’s stature on the global stage.

NASDAQ

NASDAQ is an American stock exchange headquartered in New York City. As of September 2023, it boasts a market capitalisation of over $24.94 billion, making it one of the largest exchanges globally.

Established in 1971, NASDAQ pioneered electronic trading, introducing computerised systems for faster transactions. It’s known for technology-heavy listings, including major players like Apple, Amazon, and Microsoft.

Altogether, NASDAQ hosts around 3,300 companies, mainly from the technology, healthcare, and consumer services sectors.

Shanghai Stock Exchange

The Shanghai Stock Exchange (SSE) is a significant stock market located in Shanghai, China.

As of September 2021, it had a market capitalisation of $22.88 billion, strengthening its position among the world’s largest exchanges.

Since its establishment in 1990, the SSE has witnessed remarkable growth, stepping into becoming a pivotal player on the global financial stage. It has emerged as a vital destination for both local and international investors.

Situated in Shanghai’s bustling financial district, the SSE serves as a crucial hub for economic activities, nurturing trade and investment within China and abroad.

Prominent companies gracing the SSE include industry giants like Alibaba, PetroChina, and SAIC Motor.

European New Exchange Technology

European New Exchange Technology, or Euronext, is a pan-European stock exchange and market infrastructure connecting seven European economies.

Its market capitalisation reached €5.4 trillion in February 2023. Originating from historic bourses in Bruges, Antwerp, and Amsterdam, Euronext emerged in its current form in 2000 through the merger of Amsterdam, Brussels, and Paris exchanges.

The exchange includes about 2,000 listed issuers worth €6.9 trillion, including major companies like LVMH, Unilever, and TotalEnergies.

Euronext is headquartered in Amsterdam and Paris, with additional offices in European cities like Brussels, Dublin, and Milan.

Hong Kong Stock Exchange

The Hong Kong Stock Exchange (HKEx) stands as a significant financial hub in Hong Kong, China.

It qualifies as one of the world’s largest stock exchanges when it comes to market capitalisation.

As of September 2021, the HKEx hosted 2,538 listed companies, accumulating a total market capitalisation of around HKD 54.6 trillion.

Located in the heart of Hong Kong’s Central District, the HKEx enjoys a strategic location, factor that makes it an attractive destination for global investors seeking opportunities in the Asian market.

The HKEx constitutes of a roster of esteemed companies within its listings.
Examples of note encompass Tencent Holdings Limited, a leading technology conglomerate, and Alibaba Group Holding Limited, a prominent player in e-commerce and technology.

Tokyo Stock Exchange

The Tokyo Stock Exchange (TSE) is Japan’s primary stock market. As of January 2023, it boasted 3,987 listed companies with a market capitalisation of around $5.65 trillion.

The exchange’s origins trace back to 1878, and it has since become one of the world’s largest and most influential stock markets. Situated in Tokyo’s financial district, it plays a crucial role in the country’s economic landscape.

Some notable companies trading on the TSE include Toyota, Sony, and SoftBank Group. The exchange’s significance extends beyond Japan, influencing global financial markets.

Shenzhen Stock Exchange

The Shenzhen Stock Exchange (SZSE) is a significant stock exchange in Shenzhen, Guangdong, China. Established in 1990, it is one of China’s two primary stock exchanges, alongside the Shanghai Stock Exchange.

As of May 2023, SZSE boasted a total market capitalisation of over $4.6 trillion.

Over the years, the Shenzhen Stock Exchange has become a prominent player in the global financial market, reflecting China’s economic growth and development. It has facilitated the trading of stocks, bonds, and other securities, providing a platform for companies to raise capital.

Noteworthy companies listed on the Shenzhen Stock Exchange include tech giants like Tencent Holdings, as well as various other enterprises in sectors such as healthcare, electronics, and renewable energy.

London Stock Exchange

Established in 1801, the LSE has a storied history and is one of the oldest exchanges in the world. As of August 2023, it boasts a market capitalisation of approximately $3.18 trillion

Located in Paternoster Square, the LSE has established itself as an essential hub for global financial activity. Notable companies like BP, HSBC, and Unilever are traded on this exchange.

Toronto Stock Exchange

The Toronto Stock Exchange (TSX) is Canada’s largest stock exchange, situated in Toronto, Ontario. It ranks as North America’s third-largest by market capitalisation.

Owned by TMX Group, it emerged from an 1852 brokers’ association and was formally established in 1861.

The TSX’s notable milestones include merging with the Standard Stock and Mining Exchange in 1934, introducing computer-assisted trading in 1977, and relocating to Exchange Tower in 1997.
In 2000, it transitioned into a for-profit public corporation and amalgamated with the Montreal Exchange in 2008.

As of September 2023, TSX hosted 3,451 listed companies with a total market capitalisation of $3.5 trillion.

Notable indices include the S&P/TSX Composite, encompassing all listed stocks; the S&P/TSX 60, representing blue-chip stocks; and others tracking various market segments.

The TSX operates at 130 King Street West in Toronto’s Financial District, boasting a modern architectural design. It also extends its presence globally with offices in cities like New York, London, and Beijing.

Bombay Stock Exchange

The Bombay Stock Exchange (BSE) is Asia’s oldest and largest stock exchange, founded in 1875 in Mumbai, Maharashtra. It boasts a market capitalisation of $3.8 trillion as of June 2023.

Situated on Dalal Street, Mumbai, BSE is home to 3,899 listed companies, including industry giants like Reliance Industries, Tata Consultancy Services, HDFC Bank, Infosys, and Hindustan Unilever.s

How to Invest in a Stock Exchange?

To invest in the stock exchange market, follow these steps to get started:

Choose a reputable stockbroker

Finding a reputable stock broker takes time, as many investment platforms and exchanges offer several competitive services.

This is why it is essential to do your research before selecting one. BitDelta provides new-time stock investors with stock brokers that can help you get started quickly.

Do Your Research

With the right stockbroker, choosing the right stocks to invest is no longer complex.

To choose the right stocks, you need to conduct a fundamental analysis of the company’s available to purchase stocks from, examining their company’s financials, industry trends, growth potential, controversies, etc.

Decide on shares

Now that you have selected the company (or companies) to invest in, the next step is to pick the number of shares to invest in. Note that this is based on your goals and the amount you have at your disposal.

Place the order

Once you have purchased the stocks, you can use the market limit or stop orders. Before using these techniques, you must understand their pros and cons.

Plan to sell

To do this, you must set price targets or use trailing stops. You can protect your gains or limit losses.

Pros & Cons of Investing in Stocks

Pros
  • Potential for Growth

Stocks offer significant returns over time as companies can increase their value with market demand.

  • Inflation Hedge

Historically, stocks have outperformed inflation, helping to preserve purchasing power.

  • Accessibility

Easy online access to trading platforms allows for straightforward stock market participation.

  • Low Initial Investment

Fractional shares and low-cost index funds provide entry points with minimal capital.

  • Income Generation

Dividends offer a source of regular income that can be reinvested for compound growth.

  • Liquidity

Stocks can be converted to cash quickly, facilitating flexibility in managing investments.

Cons
  • Market Volatility

Stock values can fluctuate due to various factors, potentially leading to losses.

  • Research and Monitoring

Successful investing requires time for thorough analysis and ongoing portfolio management.

  • Tax Considerations

Capital gains and dividends are subject to taxation, impacting overall returns.

  • Emotional Impact

Emotional responses can lead to impulsive decisions, potentially affecting investment outcomes.

  • Competition and Complexity

Individual investors compete with professionals and face complex market dynamics.

Stock Trading vs. Crypto

While both stocks and cryptocurrencies are investment assets, they have different foundations:

  • Stocks (also known as shares) represent the ownership in a company.
  • Cryptocurrencies are digital/virtual currencies that use cryptography for security.

At the core, stocks and crypto represent two completely different concepts on all levels, and serve different purposes in a portfolio.

Ownership

In order to buy and keep stocks, a buyer usually has to open an account at a brokerage, which makes trades and holds stock in the their name.

  • Going through a brokerage provides a certain level of security.
  • The buyer would have to disclose personal information such as their Social Security number.

One of the preceived benefits of crypto is its anonymity – no one needs to know who the crypto buyer is. However, the downside of anonymity is that the responsibility for security falls directly on the owner.

  • The owner is responsible for keeping track of where the crypto is stored.
  • Owners have little recourse when faced with hacks, as hackers can easily clean out crypto wallets.
Regulation

The stock market has always been highly regulated, as it operates through established exchanges – NYSE and LSE.

A bunch of rules exist and have been set to protect investors against any market irregularities, with very strict requirements for companies to disclose accurate updated information.

However, when it comes to cryptocurrencies, markets are less regulated and more decentralised. While some countries have started to implement regulatory frameworks, other have completely banned cryptocurrencies.

This lack of regulations prove that the crypto market can be highly risky, and more prone to fraud and manipulation, which can offset market players.

Volatility

In terms of volatility, it is no secret that cryptocurrencies outpace stocks.

Crypto prices can wildly fluctuate on a daily basis, as they are often driven by speculative trading and investor sentiment rather than underlying business performance.

As for stocks, they are much less volatile and are tied to corporate earnings – making them more stable. While it is true that stocks can fluctuate with business cycles, they certainly do not exhibit the same level of price swings as cryptocurrencies.

With that being said, stocks are not immune to risk, and are usually affected by various factors:

  1. Market downturns
  2. Poor management
  3. Shifts in industry trends

Stocks and cryptocurrency have some similarities, as well as major differences. While stocks provide more stability, cryptocurrency is considered the riskier investment.

When combined together in a portfolio, the can help balance the reward to risk ratio for an investor.

Where to Buy Stocks Today?

Today, there are various places to purchase stocks from high-value companies like Tesla, Apple, Alphabet, etc. Additionally, buying stocks has been made super easy with BitDelta.

BitDelta is a cross-asset exchange that does not only let you invest in digital currencies but also in the traditional financial market and purchase assets like stocks, bonds, oil, gas, and so on. 

You can sign up to BitDelta to buy or trade stocks on the financial market today.

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