Having a good understanding of the most liquid stock exchanges can really stand you in good stead from a trading opportunity perspective, for multiple reasons.
One data point that many aspiring traders and investors overlook is the importance of liquidity in the instrument being bought/sold.
In order to help you make the most informed decision when trading stocks, we’ve compiled a list of the 10 most liquid stock exchanges in the world, as well as listed some of the benefits that trading on a highly liquid market can have.
10 Most Liquid Stock Exchanges
- New York Stock Exchange (NYSE) – The NYSE is the largest stock exchange in the world by market capitalization and daily traded volume. This makes this not only an important center for US shares, but number 1 on the list of most liquid stock exchanges. It’s home to some of the most well-known companies and US stocks in the world, such as Microsoft, Apple and Amazon.
- NASDAQ – The NASDAQ is a global electronic marketplace for securities trading that’s based in New York. It lists many of the biggest technology companies in the world, including Google, Microsoft and Intel.
- Shanghai Stock Exchange (SSE) – This Chinese market was founded way back in 1866 and has grown to be one of the largest stock markets on the planet. The exchange’s top companies include China Mobile, Industrial and Commercial Bank of China and Ping An Insurance Group.
- Euronext – This pan-European stock exchange is headquartered in Amsterdam and includes exchanges from countries such as France, Belgium, Portugal and the Netherlands. Some of its largest companies are Royal Dutch Shell PLC, Total SA and Unilever NV.
- Tokyo Stock Exchange (TSE) – As one of the most technologically advanced exchanges in the world, this Japanese market trades over 2 trillion dollars’ worth of securities each day. It’s home to some of Japan’s biggest companies, such as Toyota Motor Corporation, Nippon Telegraph and Telephone and Mitsubishi UFJ Financial Group Inc.
- Hong Kong Exchanges and Clearing Limited (HKEx) – This Chinese stock exchange is responsible for Hong Kong’s stock market operations as well as its futures market. Some of its most prominent companies include HSBC Holdings PLC, China Life Insurance Company and Baidu Inc.
- London Stock Exchange (LSE) – Founded in 1801, the LSE is one of the oldest stock exchanges in the world and remains one of Europe’s largest markets. Many large UK companies have their stocks listed on this exchange, including HSBC, Shell, Royal Mail, and British Petroleum (BP).
- Bombay Stock Exchange (BSE) – As India’s largest stock exchange and one of the most liquid stock exchanges globally, the BSE is located in Mumbai and has over 5,500 listed companies. Its top firms include Reliance Industries Limited, HDFC Bank Limited and Housing Development Finance Corporation Limited. There are many trading apps in India now with global and local reach.
- Toronto Stock Exchange (TSX) – The TSX is the largest stock exchange in Canada and the ninth largest in North America by market capitalization. It lists a variety of companies from different sectors, including banks, mining firms and energy companies.
- National Stock Exchange of India (NSE) – The NSE is India’s second-largest stock exchange and is located in Mumbai. It has over 1,500 listed companies, with some of the biggest including Tata Consultancy Services, Infosys and HDFC Bank.
Benefits of highly liquid stock exchanges
There are many advantages to trading on a highly liquid market which revolve largely around how much demand and supply there is on high volume, and the most liquid stock exchanges.
For one, it is typically easier to enter and exit positions, both quickly and at a fair price.
In part, this is because with a greater number of buyers and sellers in a highly liquid market, there is less chance of you being unable to find another willing party to take the other side of the trade. With all buys and sells on a stock exchange, there needs an opposing side to the transaction.
There are no buys or sales without a seller or buyer, and as such, by having more buyers and sellers active throughout the trading day, you are usually able to find quick entries and exits.
Trading on a highly liquid market can result in lower trading fees.
The spreads offered by brokers are typically lower in highly liquid markets. This means you will end up paying less to both buy and sell stocks.
This reduction in spreads on both sides of the transaction can have a significant impact on your portfolio, and your overall returns over time. Being able to minimize fees, and keep more of any achieved profit from your investments is a great advantage indeed.