Wall Street, original home of the NYSE

World Stock Markets

Let's take a world tour exploring the history and the landscape of the stock market, from Mesopatamia to New York.

3 minutes



Lesson 8: World Stock Markets

A few lessons ago we explained that exchanges are markets where investments, including public stocks, are traded. You’ve certainly heard of some of the more important exchanges, but it’s helpful to dig into the history of exchanges and explore the differences between those that exist today.

The History of Stock Markets

Historians disagree over what constitutes the first known stock exchange. Before creating what we consider to be modern stock exchanges, several economic and social concepts needed to become widely accepted.

Loans, which relate to the modern concept of bonds, appeared as early as 5000 BC in the form of lending food money. Charging interest on these loans came somewhat later, with several different kingdoms of Mesopotamia, including the Kingdom of Babylon and Eshnunna, establishing rules for interest sometime between 2000 BC and 1700 BC.

It took sometime for the concept of shares to be created, with some historians arguing that the Roman Republic first popularized the idea in the form of societates publicanorum. These were groups of contractors or artisans that performed services for the government, and in which people could own tradeable partes, or shares. One such society, which the famous statesmen Cicero mentioned as having very high prices sometime between 100 and 50 BC, was a group for feeding the geese living on the capitol hill. These geese deserved special attention after having alerted the city to a surprise Gallic attack in 390 BC by honking loudly.

The Italian City States, such as Venice, Florence, Genoa and others, are often credited with the popularization of corporate bonds, government bonds and merchant banks in the 12th and 13th centuries. In fact, the term Bank comes from the Italian word banco, which simply referred to the public benches where deals were commonly struck.

The concept of a marketplace for these financial instruments was taken to a more formalized and physical level with the 1531 construction of the exchange in Antwerp. Both Antwerp and Bruges had become important banking and brokerage centers in collaboration with the Italian banks. In fact the word for exchange in many European languages, bourse, borsa, bolsa, and Börse, comes from the De Beurse square in Bruges where many foreign investors and merchants came to do business.

In 1585, merchants at the centuries old Frankfurt autumn fair began establishing uniform exchange rates for the duration fair. This is now considered the founding of the Frankfurt Stock Exchange, but more importantly formalized the concept of uniform exchange rates, an important aspect of trading.

However, these Belgian and German exchanges did not allow investors trade shares in publicly traded companies. The first to do so with a high degree of liquidity was the Amsterdam Stock Exchange. Founded in 1602, it listed shares in the legendary Dutch East India Company, the first formal company to issue shares and bonds to the general public. The exchange still exists today, although it forms part of the Euronext.

Over the following centuries, the concept spread across Europe, reaching the major trading centers, and eventually took root in the new world, with the formation of the New York Stock Exchange, the world’s largest, in 1792.

Stock Markets Today

Today there are less than 40 countries without stock exchanges, and many countries have more than one. However, many of these exchanges can be hard to access or do not offer attractive investment opportunities, so we’ll share a little more about the largest exchanges.

When we say largest, we are referring to the total market capitalization. As you learned in previous lessons, market capitalization refers to the total value of a company, obtained by multiplying the number of shares by the price of a share. The market capitalization of and exchange is just the total of the market capitalizations of the companies it lists. Some companies list portions of their shares in multiple exchanges or in other countries, in what is known as secondary listings.

Yet before discussing the exchanges, it’s important to understand the concept of a stock market index. This is a list of companies chosen from a single or several exchanges to represent the exchange or a specific market or industry, and is represented by a single number, in many cases the weighted average of the individual stocks. There are even index funds which are simply mutual funds that reconstruct the index, allowing them to move up and down with the overall market.

The World’s Largest Stock Exchanges and Indexes

New York Stock Exchange (NYSE), as we mentioned, is the world’s largest exchange, with over $20 trillion in market cap. It’s known for featuring more stable blue chip companies and famous American brands that have existed for decades. Since the 1870s, trading has begun with the “opening bell” in which a businessperson or other leader rings a bell to signal market opening.

National Association of Securities Dealers Automated Quotations (NASDAQ), founded in New York in 1971, is the world’s second largest, and is famous for being the first exchange without a physical location, instead using computer automation to complete all trades. Not surprisingly, it features many technology companies such as Apple, Facebook, Tesla, and others among the 4,000 companies it lists.

The S&P 500 Index, comprised of the 500 largest American companies, includes stocks from both the NYSE and the NASDAQ. The Dow Jones Industrial Average lists 30 companies meant to represent the industrial sectors, while the Nasdaq Composite and the Nasdaq 100 represent the NASDAQ and are weighted heavily toward technology companies.

London Stock Exchange (LSE), which evolved from the earlier Royal Exchange of the 1500s, is the largest European Exchange, with a market cap of nearly $4.5 Trillion. It also known for being the most international of exchanges, featuring companies from more than 50 countries. The FTSE 100 is one of several indices under the Financial Times Stock Exchange group that track companies on the LSE.

Japan Exchange Group, is a combination of the Tokyo Stock Exchange and the Osaka Securities Exchange, with the TSE having existed since the late 1800s. At over $6 Trillion in market capitalization, it is the third largest exchange in the world and the largest in Asia. Both the exchange, and the main Japanese index, the Nikkei, feature Japanese corporate giants such as Honda, Mitsubishi, Yokohama, and Sapporo.

The Shanghai Stock Exchange and the Shenzen Stock Exchange, with market capitalizations of over $5 Trillion and $2 Trillion, respectively, are the two independent exchanges in China. Founded in the 1990s, these exchanges have grown rapidly along with the Chinese economy, however only 2% of shares are held by non-Chinese investors.

The Stock Exchange of Hong Kong (SEHK), was founded in the 1890s, and features much more foreign investment than the exchanges on mainland China. It has a current market capitalization of over $3 trillion, and lists well known companies such as Tencent Holdings, HSBC, and the Bank of China.

Euronext was formed by the merger of a number of European exchanges, and has a market capitalization of nearly $5 Trillion. The exchange, and the Euronext 100 index, lists a variety of well known European companies, including Uniliver, LVMH, Airbus, Peugot, ING, Heineken and more.

The Frankfurt Stock Exchange, is the largest of seven German exchanges, with a market capitalization of almost $2 Trillion. Its blue chip index, the DAX, features well known companies like BMW, Deutsche Bank, Adidas, and Lufthansa.


While there are many more stock exchanges and indexes we could discuss, these primary exchanges account for over 80% of the total market capitalizations of all publicly traded companies. This means that most companies you will be interested in can be found in their listings, although in the future we hope that investors can have easier access to all exchanges.

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