A primary exchange is the exchange that serves as the base of operations for the trading that takes place on a given stock issue. Effectively serving as the home for the stock issue, the primary exchange may or may not be the only exchange where the stock is traded, but it will remain the main exchange for the stock. In most cases, the primary stock exchange for a given offering will be the most important exchange market associated with the country in which the company issuing the stock is located.
The concept of a main or primary exchange is common around the world. Most of the major exchanges do serve as the primary or main exchange for companies headquartered in their respective nations. This means that corporations that are based in Japan will most likely utilize the Tokyo Stock Exchange as their primary exchange, even though their stocks may be traded on a number of other exchanges around the world. The same is true for Canadian-based companies that will most likely call the Toronto Stock Exchange the home or primary exchange. The New York Stock Exchange serves as the primary or main exchange for the United States, as does the London Stock Exchange for the United Kingdom.
When more than one stock exchange is found in a given nation, there are some basic criteria that may be utilized in order to determine which one serves as the primary or main exchange. Factors such as the history of that exchange, the number of top companies that trade on that exchange, and even the total market capitalization will be taken into consideration. Basically, the primary exchange will be the one that has been around the longest, is considered the most important in terms of trades and accuracy, and enjoys the greatest degree of participation by domestic companies as well as foreign based businesses with a presence within that particular nation.
Trading on a primary exchange requires complying with all the criteria established by that particular exchange. This will often mean observing governmental trade regulations in regard to how the stock options are structured as well as any particular requirements established by the exchange proper. Most exchanges that are considered primary will also involve periodic reviews to make sure that companies trading on the exchange are remaining in compliance with those standards, making it possible to suspend the trading or even remove the trading privileges of the business altogether if the situation merits this type of severe action.
