What Is a Primary Exchange?

A primary exchange is the most important stock exchange in a given country. They often share certain characteristics like a storied history, a catalog of primary listings from top companies, an inventory of important foreign listings, a large total market capitalization, and significant trade value. A country may have other important stock exchanges in addition to its primary exchange.

For example, the New York Stock Exchange (NYSE) is considered the primary exchange of the United States but that doesn't take away the importance of NASDAQ. The latter is considered one of the largest exchanges in the world and home to the most important technology companies in the United States.

Key Takeaways

  • A primary exchange is the largest and most significant stock exchange in each country. 
  • Primary exchanges often have a long history, listings from the most prominent companies in a variety of sectors and industries, significant listings from international companies, and a large total market cap.
  • Primary exchanges often have specific financial criteria for companies that wish to be listed, including a minimum market cap and a number of years of audited financial statements, among other requirements.
  • Examples of primary exchanges include the New York Stock Exchange, the London Stock Exchange, and the Tokyo Stock Exchange. 

Understanding a Primary Exchange

A primary exchange varies from country to country. For example, the United Kingdom's primary exchange is the London Stock Exchange (LSE). The London exchange can trace its roots back to the 17th century, where gold and other commodities traded informally at Jonathan's Coffee House in the City, where it later became institutionalized with its own building and formal rules in 1802. Today, it remains one of the largest homes for brokers and traders to buy and sell shares of stocks, bonds, and other securities.

Prior to listing on the London Stock Exchange, a company must meet specific criteria: as per 2020 rules, a minimum market capitalization of over £700,000, three years of audited financial statements, minimum public float, and capital reserves to cover at least 12 months. The London exchange isn't the only one to employ listing requirements. The New York Stock Exchange and Bombay Stock exchange also require newly listed companies to meet minimum market capitalization and public float conditions. Such mechanisms prevent penny stocks and underfunded companies from causing havoc on a major exchange.

Other primary exchanges around the world include the Toronto Stock Exchange (TSX) in Canada, the Tokyo Stock Exchange (TSE) in Japan, the Shanghai Stock Exchange (SSE) in China, and the Bombay Stock Exchange (BSE) in India, to name a few. Each facilitates native companies to raise capital, proceed with an internal public offering, and in general add value. 

Benefits of Listing on a Primary Exchange

Listing a company on a leading global exchange can offer significant benefits. For one thing, large primary exchanges like the New York Stock Exchange leverage market models that lower stock market volatility. By combining market maker oversight with leading technology, they can secure stable price movements throughout regular trading hours.

In addition, primary exchanges boast large networks of innovative and leading companies in different industries and sectors. That means listed companies will attract more eyeballs from a global audience. Other factors to consider with a primary exchange include extensive support and solutions at all stages of development, best-in-class insights into their shares, and greater customer satisfaction.