What Is a Primary Exchange?
A primary exchange is the most important stock exchange in a given country. Often they have 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 primary exchange is the largest and most significant stock exchange in a given 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 usually 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.
- Examples of primary exchanges include the New York Stock Exchange, the London Stock Exchange, and the Tokyo Stock Exchange.
Understanding a Primary Exchange
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 U.S.
A primary exchange varies from country to country. For example, the United Kingdom's primary exchange is the London Stock Exchange (LSE). The LSE can trace its roots back to the 17th century, where gold and other commodities traded informally at Jonathan's Coffee House—it later became institutionalized with its own building and formal rules in 1802. Today, the LSE remains one of the largest homes for brokers and traders to buy and sell shares of stocks, bonds, and other securities.
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 initial public offering (IPO), and in general add value.
To become a member of a primary exchange, minimum standards and specific criteria usually must be satisfied. Only when an exchange's listing requirements are met can a company list shares on that exchange for trading.
For example, prior to listing on the LSE, a company must have a minimum market capitalization of over £700,000, three years of audited financial statements, and a minimum free float of 25%.
The NYSE and BSE 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.
Primary Exchange Listing Benefits
Listing a company on a leading global exchange can offer significant benefits. For one thing, large primary exchanges such as the NYSE 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.