Toronto Stock Exchange
The Toronto Stock Exchange is one of the largest stock exchanges in the world, with over $3 trillion in market cap. This guide will provide a comprehensive view of the Toronto Stock Exchange. So, make sure to stick to the end!
What is the Toronto Stock Exchange?
Toronto Stock Exchange, or TXS, is Canada’s largest stock exchange. It provides a wide range of tradeable assets, from shares and bonds to mutual funds and ETFs. After NYSE and NASDAQ, TSX is North America’s third-largest stock exchange by market cap. Its present market cap is $3.5 trillion.
Did you know that the Toronto Stock Exchange regulations are among some of the best in the world? It falls under the jurisdiction of OSC (Ontario Securities Commission). The OSC is the government regulatory body and one of the world’s best regulatory bodies.
How did the Toronto Stock Exchange start?
The Toronto Stock Exchange started after the “Association of Brokers” was formed to trade securities by businessmen from Toronto.
Before the institutionalization of the exchange, security trading took place in coffee houses or broker offices. Nevertheless, the TSX developed as the demand for a more centralized marketplace increased.
The initial stages of the Toronto Stock Exchange traded mining and natural resources stocks due to the dominance of these sectors in the Canadian economy. When the country became more diverse, the TSX listed many stocks.
Fun fact: In 2008, the TSX became TMX after a merger.
When was the Toronto Stock Exchange founded?
The Toronto Stock Exchange was founded in 1861. However, the groundwork started in 1852. There’s an interesting timeline of the events that led to the formation of the Toronto Stock Exchange.
As mentioned above, Toronto-based businessmen (12 to be exact) formed the Association of Brokers in 1852. After working on all the aspects of a centralized marketplace, on October 25th, 1861, the Toronto Stock Exchange formally started. Initially, it listed only 18 stocks and consisted of half-hour sessions. The cost of membership was only $5.
It’s worth mentioning that between 1852 and 1870, two commodity-orientated exchanges were formed: the Toronto Exchange in 1854 and the Toronto Stock and Mining Exchange in 1868.
After that, in 1871, 14 firms paid $250 to get a membership on the Toronto Stock Exchange. Thirty years later, in 1901, the membership fees rose to $12000, and the trading volume climbed to one million daily shares. We’ll cover the current membership fee in a while.
Every stock exchange faces uncertainty at some point, and one month after World War 1 started, the TSX suspended its operations. It resumed operations when the War ended. In 1929, when the Great Depression started, the market crashed. We’ll cover the biggest market crashes of TSX in a while.
Moving on, in 1934, the TSX merged with the Standard Stock and Mining Exchange. It was the first merger of the exchange. The merger kept the name of the Toronto Stock Exchange.
Do you know in 1977, the Toronto Stock Exchange launched the world’s first computer trading system? 1977, the exchange created TSX 300, a group of 300 of Canada’s best companies. It was created similarly to Dow Jones.
The 1990s were revolutionary years for the exchange. It introduced decimal trading, became the first stock exchange to move to complete electronic trading, and elected its first female president.
In 2002, the TSX introduced its shares and the S&P 500 combined with the TSX 300 and created the S & P/TSX Composite Index. In 2008, the TSX Group was renamed TMX Group. To this day, the TMX Group looks after all the aspects of TSX.
Speaking of TMX, let’s see who owns the Toronto Stock Exchange.
Who owns the Toronto Stock Exchange?
The TMX Group owns the Toronto Stock Exchange.
The TMX Group is a Canadian holding company that owns and manages several stock exchanges. It operates
- Toronto Stock Exchange,TSX Venture Exchange,Montreal Stock Exchange, andTSX Alpha
The group offers services such as trading, clearing, reporting, and other market participants. The TMX is mandated with the development, listing administration, operation, and regulation of the Toronto Stock Exchange.
How does the Toronto Stock Exchange work?
The Toronto Stock Exchange works like a marketplace and provides a platform for investors to buy/sell stocks, bonds, mutual funds, ETFs, and other assets.
Listing companies must adhere to specific criteria established by the exchange. For example, companies should have at least one million publicly traded shares and a market cap of over $4 million. For Canadian companies, the sector determines that the listing fee is $15,000 to 150,000. The technology sector often has high costs.
After the stocks of a company become listed, the TSX permits electronic and floor trading. Speaking about market participants, the exchange has different types of market players, such as retail investors, institutional investor broker–dealers, and market makers.
Along with stocks, bonds, mutual funds, and ETFs, the Toronto Stock Exchange also provides trading of several indices:
The S&P/TSX Composite Index monitors the returns of all Canadian Stock Market and accounts for 70% of the total market capitalization on the Toronto Stock Exchange.
The S&P/TSX 60 tracks the performance of the top 60 stocks on the Toronto Stock Exchange. It is a unit of S&P Dow Jones Indices.
The S&P/TSX Venture Composite Index constitutes the top 500 publicly traded firms (We’ll talk about the TSX Venture Exchange in a while).
The S&P/TSX Venture Composite Index constitutes the top 500 publicly traded firms (We’ll talk about the TSX Venture Exchange in a while).
What is the purpose of the Toronto Stock Exchange?
The purpose of the Toronto Stock Exchange is:
- As TSX is Canada’s largest exchange, it helps in economic development. By allowing firms to get listed and investors to invest, TSX helps in complement and economic innovation. The Toronto Stock Exchange provides a platform for Canadian and global investors, boosting the Canadian economy.
- The key role of TSX is to raise capital for companies. As we discussed above, companies have to follow certain guidelines to list their stocks, and in this way, they can raise capital. Whenever the stock price increases, companies get the capital.
- The other purpose of the TSX is to provide investment opportunities to investors. Retail and institutional investors can buy/sell multiple financial securities. When the stock price rises, investors get rewarded through capital appreciation and dividends if the companies provide them.
- The TSX also provides a platform to get the price of the stocks listed on the exchange.
Who created the Toronto Stock Exchange?
The Toronto Stock Exchange was created by a group of 12 businessmen. They wanted to establish a formal marketplace for share trading. In 1861, the exchange was formally introduced.
What are the trading hours on the Toronto Stock Exchange?
The trading hours in the Toronto Stock Exchange are between 9.30 AM and 4 PM Eastern Standard Time, with Monday and Friday. The exchange does not take a lunch break; there are post-trading sessions after trading. The post-trading session starts at 4.15 PM and ends a few minutes before 5 PM EST.
What are the major exchanges on the Toronto Stock Exchange?
The major exchanges in the Toronto Stock Exchange are the TSX, TSXV, TSX Alpha Exchange, and MX.
TSX
The TSX is the main stock exchange that trades all publicly traded companies. It has a different set of requirements for different sectors. However, some of the requirements are the same for each sector, including:
- The minimum operating history should be one year. The Pre-tax cash flow should be C$500,000 in the last fiscal year. Companies must have two Canadian directors. The Toronto Stock Exchange will look into the company’s management records to see if they hold 10% or more in its stocks.
TSX Venture Exchange
The TSX Venture Exchanges focuses on emerging companies in resource, technology, mining, real estate, and other sectors. The TSX Venture Exchange was founded in 1999 and has a two-tier system.
Tier-1 includes emerging companies with larger capital than Tier-2, and they get to enjoy certain listing benefits.
In Tier-1 the listing requirements are different among sectors. These include;
- C$5,000 net tangible assets, Or $ 5. Millions of dollars in revenue for industrial technology and life sciences companies. $10 Million net tangible assets for investment companies. For all sectors, the minimum working capital is C$200,00.The minimum number of float shares should be 1 million for all sectors.For all sectors, the minimum IPO price is C$0.10.If the company is outside North America, additional requirements apply to it at the Toronto Stock Exchange.
In Tier-2;
- The industrial, technology, and live sciences industries should have net tangible assets of C$750 00. The net tangible asset for real estate is C$2,000 0. The minimum working capital for all sectors is C$100, 0. All the sectors should have a minimum of 500,00 floating shares. The minimum IPO price is C$0.10 for all sectors across the board. As in Tier-1, the exchange has further conditions when the company is not located within North America.
TSX Alpha Exchange
The TSX Alpha provides an alternative trading system for stocks listed on TSX and TSXV. It was founded in 2008 and provides additional liquidity options like dark liquidity and innovative order types. It caters to institutional investors.
TSX DRK
The TSX DRK offers dark pool trading services. The main purpose of the dark pool is to execute large orders while keeping anonymity. Like the Alpha Exchange, the DRK caters to institutional investors. They often use dark pools when trading large volumes of stocks.
What are the biggest crashes on the Toronto Stock Exchange?
The biggest crashes on the Toronto Stock Exchange occurred in 1929, 1973/74, 1987, 2000, 2008, and 2020. Let’s see what was the reason behind these crashes:
In 1929, when the Great Depression started, the Toronto Stock Exchange suffered heavy losses. In 1973/74, the TSX experienced a bearish market because of oil crises, rising inflation, the war in Vietnam, and the Watergate Scandal. The S&P/TSX Composite Index declined by more than 20%.On October 19, 1987, commonly called Black Monday, the TSX experienced a sharp decline.
The S&P/TSX Composite Index fell over 11% during the day. When the dot-com bubble burst in 2000, tech and internet stocks on the TSX suffered heavy losses, causing the overall market to decline. The global financial crisis of 2008 had a significant impact on the TSX. It fell by more than 35% during the year. When the pandemic hit in 2020, TSX experienced a sharp downturn, losing 37% between February 19 and March 23.
Does the Toronto Stock Exchange have holidays?
Yes, the Toronto Stock Exchange has holidays. The list of holidays includes:
It’s important to note that these are the official holidays listed on the Canadian calendar, and specific holidays can occur in a year.
- New Year’s Day on January 1
- Family Day on February 19
- Good Friday
- Victoria Day on May 20
- Canada Day on July 1
- Civic Holiday on the first Monday of August
- Labor Day on the first Monday of September
- Thanksgiving Day
- Christmas Day on December 25
- Boxing Day on December 26
What was the first company traded on the Toronto Stock Exchange?
The first company traded on the Toronto Exchange didn’t appear in historical records. When a group of businessmen formed the Association of Brokers in 1852, they began dealing with the Gas Company of Toronto, the Guelph Road Company, and the Yorkville and Vaughan Plank Road Company.
Final thoughts
So, there you have it! We learned everything about the Toronto Stock Exchange, from its origins to its purpose. We hope you enjoy this guide!
