How Does the Canadian Stock Market Work?

When someone refers to the stock market in the United States, people generally think of the New York Stock exchange, which is the largest exchange and includes indexes like the DOW Industrials and the S&P 500. Similarly, the Canadian stock market generally refers to the Toronto Stock exchange, or TSX, which is by far the largest stock exchange in Canada. There are also smaller stock exchanges in Montreal and Winnepeg, which deal with futures contracts and options, and commodity trading respectively.

The TSX operates similarly to any other stock market--it includes listings of hundreds of companies which offer equity trading for private investors. Like with any other exchange, investors buy stock in companies on the exchange through a broker, who makes a trade on their behalf for a fee. One major difference between the exchanges is that the TSX is completely automated, so there is no physical trading floor. This means trades are often made online through discount brokers, which is an increasingly common practice across most stock exchanges.

Since the TSX is located in Canada, it lists companies whose strengths are in line with the Canadian economy and natural resources, meaning that a lot of companies listed are involved in the mining as well as the oil and gas industry. The TSX has more companies listed in these industries than any other stock exchange. It also lists Canada's largest banks, so it is an important exchange in the finance and credit markets.