Toronto Stock Exchange (TSX): What it is, How it Works

What is the Toronto Stock Exchange (TSX)?

The term Toronto Stock Exchange (TSX) refers to a Canadian stock exchange located in Toronto, Ontario. Founded in 1861, the TSX is Canada's premier stock exchange with more than 1,500 listed companies, including those from the energy, mining, technology, and real estate sectors. The exchange is also home to international listings and exchange-traded products. It became fully electronic after closing its trading floor in 1997. In 2007, the TSX merged with the Montreal Exchange (MX) to form the TMX Group.

Key Takeaways

  • The Toronto Stock Exchange is the largest exchange in Canada.
  • The exchange is fully electronic with more than 1,500 companies listed.
  • All transactions are conducted in Canadian dollars.
  • The TSX is owned by TMX Group, which also owns the Montreal Exchange, the TSX Venture Exchange, and the Canadian Derivates Clearing Corporation.

Understanding the Toronto Stock Exchange (TSX)

The Toronto Stock Exchange is one of the largest stock exchanges in the world and is the third-largest in North America after the New York Stock Exchange (NYSE) and the Nasdaq. The exchange's history dates back to the mid-1800s. It was established in 1861 and was officially incorporated in 1878 under the name Toronto Stock Exchange or TSE. It became known as the TSX after the company was rebranded in 2002.

The exchange operates Monday to Friday, except for statutory holidays. The market opens with regular trading activity taking place between 9:30 a.m. ET and 4:00 p.m. ET. Trading orders may be entered but not executed during the pre-open between 7:00 a.m. and 9:30 a.m. ET.

As noted above, the exchange eliminated its trading floor in 1997. Trades on the TSX became electronic, similar to the Nasdaq in the United States. Traded instruments include shares in companies, investment trusts, and exchange-traded products (ETPs). Other financial instruments such as bonds, commodities, futures, options, and other derivative products are also actively traded. All transactions are executed in the Canadian dollar. According to the 2020 Guide to Listing, there were 1,572 listed issuers on the exchange.

The exchange launched the TSE 300 Composite Index in 1977, which was similar to the S&P 500. Composed of the most influential stocks on the exchange, the name of the index was changed to the S&P/TSX Composite Index in 2002. The index is rebalanced on a quarterly basis in March, June, September, and December.

Interested in investing in Canadian companies? Try purchasing American depositary receipts, which are available for larger Canadian corporations.

Special Considerations

In 1999, the TSX became Canada's only exchange for senior equities. Two years later, it acquired the TSX Venture Exchange, which primarily lists small-cap stocks. As noted above, the exchange is now operated by the TMX Group, a result of the merger between the TSX and the MX. In addition to the TSX, the MX, and the TSX Venture Exchange, the group also operates the TSX Alpha Exchange, Shorcan, which specializes in fixed income products in Canada, and the Canadian Derivates Clearing Corporation (CDCC). The CDCC facilitates the clearing of Canadian exchange-traded derivative products and other financial instruments.

The TSX and the London Stock Exchange (LSE) explored the opportunity for a merger. The deal fell through in 2011 after it failed to receive the required two-thirds majority of votes from shareholders. TMX proposed the merger to avoid a takeover by Maple Group Acquisition Corporation, a consortium of Canadian investors including the Canadian Plan Investment Board, Scotia Capital, and TD Securities. The TMX Group agreed to the Maple Group takeover, which was completed in 2012.

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  2. Financial Post. "Timeline: 160 years of the Toronto Stock Exchange." Accessed Feb. 5, 2021.

  3. Statista. "Largest stock exchange operators worldwide as of March 2020, by market capitalization of listed companies." Accessed Feb. 5, 2021.

  4. The Strategic CFO. "Toronto Stock Exchange (TSX)." Accessed Feb. 5, 2021.

  5. TMX. "Trading Hours." Accessed Feb. 5, 2021.

  6. TMX. "Sector and Product Profiles." Accessed Feb. 5, 2021.

  7. Toronto Stock Exchange and TSX Venture Exchange. "2020 Guide to Listing," Page 7. Accessed Feb. 5, 2021.

  8. S&P Dow Jones Indices. "S&P/TSX Composite: Factsheet." Downloaded Feb. 5, 2021.

  9. TMX. "TMX Group." Feb. 5, 2021.

  10. TMX. "About Shorcan." Accessed Feb. 5, 2021.

  11. TMX. "Canadian Derivatives Clearing Corporation." Accessed Feb. 5, 2021.

  12. The Wall Street Journal. "TMX, LSE Terminate Merger Deal," Accessed Feb. 5, 2021.

  13. The Globe and Mail. :Maple Group wins control of TMX, with 91 per cent of shares tendered." Accessed Feb. 5, 2021.

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