The trading of stocks, bonds, and other assets takes place on stock exchanges. They are a crucial part of the world financial system since they enable investors to purchase and sell assets as well as a means of capital raising for businesses. As of 2022, there are 20 main stock exchanges worldwide, ranked by market capitalisation. Each of these exchanges, which is crucial to the functioning of the global financial system, has unique characteristics, such as time zones, trading hours, and market sectors. It’s crucial to keep in mind that the stock market is dynamic and always changing, therefore this list can alter in the future.
Stock markets in the USA?
The New York Stock Exchange (NYSE) is the largest stock exchange in the world by market capitalization. It is located in New York City and is home to many of the largest and most well-known companies in the United States, such as Apple, Coca-Cola, and General Electric.
The Nasdaq Stock Market is another major stock exchange in the United States. It is known for its electronic trading platform and is home to many technology companies, such as Amazon, Facebook, and Tesla.
What about outside of the USA?
The London Stock Market is the most well-known stock exchange in Europe (LSE). Many of the biggest businesses in the UK, including BP, HSBC, and Royal Dutch Shell, are headquartered on the London Stock Exchange (LSE). For the rest of Europe Euronext, is a pan-European stock exchange group, with exchanges located in Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris. The Tokyo Stock Exchange (TSE), the biggest stock exchange in Asia, is where many of the biggest Japanese corporations, like Toyota, Sony, and Honda, are headquartered. The two main stock markets in China are the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Many of China’s major state-owned businesses are located in the SSE, while many of its smaller, privately held businesses are found in the SZSE.
Why do some countries have larger stock markets?
This is a really interesting question, and some commentators suggest that it is due to the different legal environments in the countries. Legal systems can have a significant impact on stock markets, as they establish the rules and regulations that govern the buying and selling of securities. Two major types of legal systems are common law and civil law.
Common law is a legal system that was developed in England and is now utilised in numerous nations, including the United States, Canada, and Australia. This implies that rather than depending exclusively on written laws or statutes, judicial judgements are used to interpret and implement the law. This system is renowned for its adaptability and flexibility because it can change over time to take into account societal and economic changes.
Civil law is based on written laws and regulations and is practised in many European nations as well as nations like China and Japan. As a result of the laws’ clarity and the fact that they don’t change as frequently as common law, this system is renowned for its stability and predictability.
Stock markets may be significantly impacted by various legal structures. Common law nations, for instance, typically have more established securities markets and greater standards of investor protection. This is due to the fact that common law systems permit more latitude in the interpretation and enforcement of securities regulations, which may lead to a more effective market. The tight adherence to written regulations in civil law nations, on the other hand, may result in more restricted securities markets and less investor protection.
In addition, the legal system can also affect the way companies operate and raise capital. In common law countries, companies have more freedom to raise capital through a variety of means, such as initial public offerings (IPOs) and private placements. In civil law countries, the process for raising capital may be more regulated and restrictive, making it harder for companies to access the capital they need to grow and expand.
This was something taught heavily in my investments classes when I was at University, in short, legal systems can have a significant impact on stock markets. Common law systems such as those in the US and UK tend to result in more efficient markets with higher levels of investor protection, while civil law systems may lead to more rigid markets with less investor protection. The legal system can also affect the way companies operate and raise capital. A fair observation, especially with the rise of markets in Asia is that the landscape is forever changing and it is likely that the importance of legal systems will dimmish over time.
If you’re looking to become a savvy investor, our previous post on what is the FTSE 100 is a must-read. Gain valuable insights and tips by following the link to access it.