Distinctions Between the Different Types of Stock Markets

Stocks are a central part of many investment portfolios and a good way to add diversity to more conservative investments. The question of which stocks to buy is complicated by the many stock exchanges and markets that investors can choose from. While many investors go straight for the large, well-known markets in New York and elsewhere, other types of stock markets stand out for their distinctive offerings, size, access or other features.

Size

Size can be a major distinction between different stock markets. Small markets only offer local and regional stocks, typically in small companies. Large markets host stock trading for hundreds or even thousands of companies, including the largest and most valuable publicly traded companies in the world. Large markets give investors more choices, while also pitting similar stocks directly against one another. They also offer "one-stop shopping" for brokers and investors, covering broad ranges of industries and sectors of the economy.

Listing Cost

Companies that want to go public must pay a listing fee to have their stock made available for trade on a stock exchange. Each market and exchange sets its own policies and prices. Large markets, such as the New York Stock Exchange or Nasdaq in the United States, charge companies initial listing fees of $100,000 or more and annual fees of up to $500,000, according to Forbes. Smaller markets charge significantly less, allowing smaller businesses to go public and attract investors while keeping more money for operations.

Access

Large stock markets around the world dominate the financial news, just as the companies they trade in dominate industry news. Stock indexes, such as the Dow Jones Industrial Average and the Standard & Poor's 500, only include stocks from large markets. Investors need to work harder to keep up with smaller markets. Brokers may not offer access to smaller markets or have experience in them to impart to their investor clients.

Nationality

Major stock markets around the world are organized around companies that are based in the same country as the stock exchange. For example, the London Stock Exchange is the primary source of investments in U.K.-based businesses. Stock exchanges in Europe and Asia deal in regional companies, while the major U.S. markets offer trading of shares in American businesses. As the economy becomes more globally connected, investors need to understand the opportunities available in international markets as well as domestic ones.

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