Most stock exchanges today are publicly-traded companies, although that wasn’t always the case. Many were originally organized and controlled by their member market makers, traders, and brokers.
Stock exchanges are not like other businesses. The performance of a national stock exchange is often taken as a proxy for the health of a nation’s economy, or at least investor enthusiasm for the country’s prospects.
National exchanges also play an under-appreciated policy role in deciding the listing and compliance standards for companies that wish to go public. On top of all that, there is a nebulous but real sense that national pride is often somehow tied to stock exchanges.
With that in mind, consolidation in the stock exchange sector attracts quite a bit of attention, for better or worse. The European Union blocked a proposed merger of the Deutsche Borse with NYSE-Euronext in 2011 on the grounds that the new company would have a virtual monopoly over the sale of derivatives in Europe.
The same year, a bid by the London Stock Exchange (or rather, its partner London Stock Exchange Group) to acquire TMX Group (owner of the Toronto Stock Exchange) fell through when Toronto shareholders rejected it.
Key Takeaways
- Stock exchanges were originally organized as self-regulatory organizations owned and operated by their member traders, brokers, and market makers.
- More recently, exchanges have bought out their members and offered shares to the public via IPOs.
- Today, most major exchanges are publicly traded companies, including NYSE and the CME Group.
NYSE
The New York Stock Exchange (NYSE) is a publicly traded company and is far and away the largest exchange in the world as measured by market capitalization and exchange-traded value. According to the World Forum of Exchanges, the NYSE had a market capitalization of $25.56 trillion as of December 2023.
Once owned entirely by its members on the floor, the NYSE went public in 2006 after acquiring Archipelago. It then acquired Euronext in 2007 and the American Stock Exchange in 2008.
As of 2013, the Intercontinental Exchange (ICE) had acquired the NYSE (as NYSE Euronext). An American company, the ICE owns the NYSE and Euronext, the latter of which is listed in Paris, Amsterdam, Brussels, and Lisbon.
Nasdaq Inc.
The second-largest public stock exchange with a December 2023 market cap of $23.41 trillion, Nasdaq Inc. also owns the Philadelphia and Boston stock exchanges as well as its namesake Nasdaq.
NASDAQ acquired seven Nordic and Baltic exchanges, collectively known as the OMX Group, in 2008. Its attempt to acquire the parent company of the London Stock Exchange failed.
Nasdaq Inc. is a publicly-traded company.
Japan Exchange Group
The Japan Exchange Group, with a $6.14 trillion market cap as of December 2023, was formed in 2013 with the merger of the Tokyo Stock Exchange and Osaka Stock Exchange. Both exchanges originally formed in 1878. The Tokyo Stock Exchange handled cash-equity markets and the Osaka Stock Exchange managed derivatives.
In 2019, the Japan Exchange Group acquired Tokyo Commodity Exchange, Inc. and began dealing in commodity derivatives.
A self-regulating entity, the Japan Exchange Group is a publicly-traded company.
Stock Exchange vs. Stock Market
A stock exchange refers to the location(s) where trading in equities takes place. A stock market refers to the totality of equity trades carried out by various exchanges. Therefore, a nation’s stock market as measured by market cap could be larger than its individual exchanges.
London Stock Exchange
The London Stock Exchange is one of the world’s oldest exchanges, with a $3.42 trillion market cap as of September 2023. It is owned by the London Stock Exchange Group, which is itself a publicly-traded company.
A company history traces the origins of the London Stock Exchange to an establishment called Jonathan’s Coffee House, where prices of pieces of eight were posted in 1698. The business flourished until the introduction of the telegraph in 1840.
In 2019, the London Stock Exchange and Shanghai Stock Exchange created a connection so that international investors could invest in China’s growth and Chinese investors could directly access LSE-listed companies.
Hong Kong Stock Exchange
The Hong Kong Stock Exchange (HKEX) had a $3.97 trillion market cap as of December 2023.
HKEX was the first exchange to go public on June 27, 2000.
In 2012, HKEX acquired the London Metal Exchange (LME), the top metal exchange globally. HKEK also pioneered the concept of mutual market access in 2014 with the Shanghai-Hong Kong Stock Connect program. Two years later it extended its mutual access with the Shenzhen-Hong Kong Stock Connect program.
Shanghai Stock Exchange
According to the World Federation of Exchanges, the Shanghai Stock Exchange had a $6.52 trillion market cap as of December 2023.
It is one of the few stock exchanges in the world still owned and controlled by a government, specifically by the China Securities Regulatory Commission. The Shanghai Exchange is operated as a non-profit and is arguably one of the most restrictive of the major exchanges in terms of listing and trading criteria.
On June 17, 2019, the Shanghai-London Stock Connect program was officially launched with Huatai Securities and the SSE London office.
On January 22, 2024, the combined market capitalization of India’s BSE and NSE exchanges was $4.33 trillion. As a result, and for the first time, India overtook Hong Kong to become the fourth-largest stock market in the world.
Bombay Stock Exchange and National Stock Exchange of India
Along with the Tokyo Stock Exchange, India’s major exchanges are throwbacks to how most exchanges used to organize themselves.
Incorporated in 1992 and launched in 1994, the National Stock Exchange (NSE) of India demutualized in 2003. It is still largely owned by banks and insurance companies.
The BSE, formally known as the Bombay Stock Exchange, is owned by brokers, with other outside investors and domestic financial institutions owning the rest. Formed in 1875, it is Asia’s first stock exchange.
Other Major Exchanges
Of course, the trading and investment world involves more than stocks. Derivatives are very lucrative for exchanges.
In the United States, the Chicago Mercantile Exchange (CME) demutualized in 2000, went public, and eventually acquired the Chicago Board of Trade and NYMEX. CME Group is now a major player in the futures and derivatives world.
On the options side, the Cboe Exchange (Cboe) also trades publicly as Cboe Global Markets.
Last and not least, Eurex is a significant derivatives exchange owned by Deutsche Borse.
Can I Buy Shares in Stock Exchanges?
Yes, if they are publicly-held companies. You can contact your brokerage to look into and make such a transaction.
What Is the Largest Stock Exchange in the World?
The New York Stock Exchange is the largest, based on the market capitalization of its listed companies as compared with other exchanges.
What Is the Oldest Stock Exchange in the World?
The Amsterdam Stock Exchange is thought to be the oldest. Documents of the time indicate that in 1602, the Dutch East India Company offered and sold shares in its organization to the public.
The Bottom Line
The owners of exchanges can require companies to pay listing fees, traders to pay for market access, and investors to pay transaction fees. It is not altogether surprising, then, that there has been so much consolidation activity in this space.
While these transactions are interesting, they have little benefit for the individual investor. Trading stocks listed on foreign exchanges remains difficult and expensive for U.S. investors and no merger will change that.
In the meantime, it looks like there is an unmistakable trend in the market toward greater global integration and fewer small, independent operators.