Stock Market

This article explains the stock market in depth: what stocks are, how exchange-traded funds (ETFs), bonds, and derivatives work, and how they are traded. It then lists the world’s major stock markets (exchanges) with examples, and gives five widely used ETFs as practical examples.

1. Overview: What is the stock market?

The stock market is the institutional and electronic framework through which ownership shares in publicly traded companies (stocks) are issued, bought and sold. It provides liquidity, price discovery, capital formation for companies, and allocation of ownership. Markets operate under regulatory regimes, use central order books and clearing systems, and match buyer and seller orders through brokers and electronic platforms.

2. Primary instruments traded on the stock market

Stocks (Equities)

Definition: A stock (share) represents fractional ownership in a corporation. Shareholders may receive dividends and voting rights, depending on the share class.

Types of stocks:

  • Common shares: Voting rights, variable dividends.

  • Preferred shares: Fixed dividends, priority over common shares in liquidation, usually limited/no voting rights.

  • Ordinary vs. ADS/GDRs: Domestic shares vs. depositary receipts that permit foreign listing/trading.

How stocks are traded:

  • Primary market (issuance): Companies raise capital via initial public offerings (IPOs) or follow-on offers. Investment banks underwrite listings and place securities with investors.

  • Secondary market (exchange trading): Investors trade existing shares on exchanges or OTC venues. Orders flow through brokers into exchange order books or electronic trading systems and are matched based on price/time priority.

  • Settlement and clearing: Trades are cleared and settled through central counterparties (CCPs) and depositories (T+1/T+2 rules vary by jurisdiction).

Exchange-Traded Funds (ETFs)

Definition: An ETF is an investment fund whose units trade on exchanges like stocks. ETFs typically track indices, sectors, commodities, bonds, or bespoke strategies.

Structure and mechanics:

  • Creation/redemption mechanism: Authorized Participants (APs) create or redeem ETF shares in large blocks (creation units) in exchange for the underlying basket of assets; this keeps ETF price aligned with net asset value (NAV).

  • Passive vs. active ETFs: Passive ETFs track indices; active ETFs are actively managed.

  • Advantages: Intraday liquidity, diversification, typically lower expense ratios than many mutual funds.

  • How they are traded: Bought/sold via brokerage accounts on exchanges. Price can diverge slightly from NAV; arbitrage by APs tends to keep spreads tight.

Examples (largest by assets under management):
SPDR S&P 500 Trust (SPY), iShares Core S&P 500 (IVV), Vanguard S&P 500 ETF (VOO), Vanguard Total Stock Market ETF (VTI), Invesco QQQ Trust (QQQ). These funds are consistently among the largest U.S. ETFs by AUM. 

Bonds (Fixed Income traded on markets)

Definition: Bonds are debt securities in which the issuer promises to pay interest (coupon) and repay principal at maturity.

Types traded by market participants:

  • Government bonds: Sovereign debt (e.g., U.S. Treasuries).

  • Municipal bonds: Issued by local governments.

  • Corporate bonds: Issued by corporations (investment grade or high-yield).

  • Convertible bonds: Can convert into equity under specified conditions.

How bonds are traded:

  • Primary issuance: Conducted via auctions (sovereign) or syndication (corporate).

  • Secondary markets: Many bonds trade OTC between dealers; some government and corporate bonds also trade on electronic platforms and exchanges. Price is quoted as yield or clean price; settlement is handled by fixed-income clearinghouses.

Derivatives (Options, Futures, Swaps)

Definition: Derivatives are contracts whose value derives from an underlying asset (stock, index, commodity, currency, bond).

Common types:

  • Futures: Standardized contracts to buy/sell an asset at a specified price on a future date; traded on futures exchanges and centrally cleared.

  • Options: Contracts giving the right (not obligation) to buy (call) or sell (put) an asset at a strike price before/at expiry; listed and OTC options exist.

  • Swaps and forwards: OTC contracts used by institutions to exchange cash flows, hedge rates or currency exposure.

How derivatives are traded:

  • Exchange-traded derivatives: Listed on regulated exchanges (e.g., CME, Eurex), with standardized contract terms and central clearing (reducing counterparty risk).

  • OTC derivatives: Bilateral deals (swaps, forwards); they often require collateral (margining) and may be centrally cleared post-2008 reforms.

Uses: Hedging risk, leverage for speculation, arbitrage, and synthetic position creation (e.g., synthetic equity exposure via options).

3. Major stock markets around the world

Below is a concise list of the major stock exchanges globally (by market capitalization and prominence), with the city and a brief note. These exchanges host the majority of global equity trading and listings. (Sources aggregated from exchange rankings and market-cap summaries.)

  1. New York Stock Exchange (NYSE) — New York, USA

  2. NASDAQ — New York, USA

  3. Shanghai Stock Exchange (SSE) — Shanghai, China

  4. Japan Exchange Group (Tokyo Stock Exchange) — Tokyo, Japan

  5. Hong Kong Exchanges and Clearing (HKEX) — Hong Kong, China

  6. Euronext — Pan-European (Amsterdam, Paris, Brussels, Lisbon, Dublin, etc.)

  7. Shenzhen Stock Exchange (SZSE) — Shenzhen, China

  8. London Stock Exchange (LSE) — London, UK

  9. TMX Group (Toronto Stock Exchange, TSX) — Toronto, Canada

  10. Bombay Stock Exchange (BSE) & National Stock Exchange (NSE) — Mumbai, India (NSE is the larger by turnover)

  11. Australian Securities Exchange (ASX) — Sydney, Australia

  12. Korea Exchange (KRX) — Seoul, South Korea

  13. Deutsche Börse (Frankfurt/Xetra) — Frankfurt, Germany

  14. SIX Swiss Exchange — Zurich, Switzerland

  15. B3 (Brasil Bolsa Balcão) — São Paulo, Brazil

Note: Rankings by market capitalization and trade volume shift over time; sources cited above provide periodic updated rankings. 

4. Examples: Top traded stocks and ETFs (practical context)

Widely held / top stocks (examples used in indices and common reference)

Large-cap, highly liquid stocks that dominate global indices and trading include: Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Nvidia (NVDA). These companies frequently appear among the top global stocks by market capitalization and trading volume. 

Top ETFs (by assets under management) — five examples

The ETFs below are reliably among the largest and most liquid funds globally. They are commonly used by investors for core exposure to U.S. equities and are suitable examples of how ETFs trade on exchanges: SPY, IVV, VOO, VTI, QQQ. These funds are the largest by AUM and trade heavily on U.S. exchanges.

  • SPDR S&P 500 ETF Trust (SPY) — One of the earliest and most liquid ETFs; tracks the S&P 500.

  • iShares Core S&P 500 ETF (IVV) — S&P 500 tracker with low expense ratio.

  • Vanguard S&P 500 ETF (VOO) — Another low-cost S&P 500 ETF by Vanguard.

  • Vanguard Total Stock Market ETF (VTI) — Broad exposure to the entire U.S. equity market.

  • Invesco QQQ Trust (QQQ) — Tracks the Nasdaq-100, heavy in large tech names.

5. How trading differs across venues and instrument types

  • Exchange-traded stocks & ETFs: Traded via central order books with transparent prices and trade reporting. Liquidity and spreads depend on market makers and order flow. Settlement is handled through central securities depositories and clearing houses.

  • OTC instruments (many bonds, some derivatives): Bilateral pricing, less transparent, often dealer-based. Counterparty risk is managed by collateral and, where applicable, central clearing.

  • Futures and exchange-traded derivatives: Standardized contracts, traded on futures exchanges with initial and variation margin, and cleared centrally to minimize counterparty risk.

  • Dark pools / alternative trading systems: For large institutional orders that seek reduced market impact; trades may be reported with delayed transparency.

  • Cross-listing and ADRs: Companies may list on multiple exchanges or issue depositary receipts to access foreign capital; liquidity and rules differ by venue.

6. Market participants and their roles

  • Retail investors: Individual participants trading via brokerages.

  • Institutional investors: Pension funds, mutual funds, hedge funds—large liquidity providers and price influencers.

  • Market makers / liquidity providers: Provide continuous bid/ask quotes to facilitate trading.

  • Brokers / dealers: Execute client orders and sometimes trade on their own account.

  • Exchanges / clearinghouses / depositories: Provide infrastructure, matching, clearing and settlement.

  • Regulators: Oversee market integrity, protect investors, and enforce disclosure and reporting rules.

7. Practical points for learners and traders

  • Liquidity and depth matter: Highly traded stocks/ETFs (large-cap & large AUM) have tight spreads and lower transaction costs.

  • Understand settlement and corporate actions: Dividends, splits, corporate actions affect share ownership and pricing.

  • Leverage and margin: Many exchanges allow margin trading; derivatives provide leverage but increase risk.

  • Costs and taxes: Brokerage commissions (often low or zero on many platforms), ETF expense ratios, and capital gains tax vary by jurisdiction.

  • Diversification via ETFs: ETFs are efficient for building diversified core portfolios; choose by tracking methodology, expense ratio, and liquidity.

8. Further reading and data sources

  • Listings and market-cap rankings of exchanges: compiled exchange directories and market-cap resources. 

  • ETF rankings and AUM: ETF databases and market data providers listing largest ETFs by assets under management. 

  • Largest public companies by market capitalization: market-cap aggregators and financial research sites.

Conclusion

The stock market comprises a diverse set of instruments (stocks, ETFs, bonds, derivatives) and venues (exchanges and OTC markets). Understanding the mechanics of each instrument—how they are created, traded, and settled—plus the major global exchanges and widely used ETFs, equips learners and practitioners to make more informed decisions and to choose appropriate tools for investing, hedging, or speculating.

If you would like, I can:

  • Produce a printable one-page cheat sheet summarizing key rules and tickers (e.g., SPY, IVV, VTI, QQQ, AAPL, MSFT), or

  • Provide exchange-specific opening hours, settlement cycles, and the top 10 listings for a particular exchange (for example NYSE or NSE).