Everything You Need To Know About The Toronto Stock Exchange

Everything You Need To Know About The Toronto Stock Exchange

The Toronto Stock Exchange (TSX) is the premier securities exchange in Canada, which has long been attracting billions in local and foreign capital - thanks to its broad selection of mining and alternative biotechnology stocks. TSX is also one of the oldest organized stock exchanges in the developed world. Here is a basic dossier: 

  • The Toronto Stock Exchange was founded in 1861 and is home to over 3,400 listings
  • The exchange is often abbreviated as TSX
  • The TMX Group is the parent company of the exchange and is listed under the TSX:X ticker
  • The exchange has a total market capitalization of $3.3 trillion

The Toronto Stock Exchange is the senior marketplace owned by the TMX Group, which also owns and operates the TSX Venture Exchange, or TSXV, which is a venture capital marketplace for emerging stocks. 

"TMX is a main street story, because what we're really about is actually being helping those companies raise raise capital, expand, grow, hire, and we've been for 170 years an engine of the Canadian economy" - John McKenzie

The main TSX market is home to 1,640 stocks, while TSXV has 1,649 official listings. However, the TSXV is much smaller than the TSX in terms of market capitalization; only amassing $78 billion in market value. 

Similarly to the London Stock Exchange, Toronto offers a wide variety of multinational corporations that are double-listed on the exchange. 

10 Facts You Need To Know About The Toronto Stock Exchange

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  • The Toronto Stock Exchange is home to a wide variety of cannabis stocks, as cannabis is fully legalized in Canada
  • The average market capitalization of stocks on the TSX is $148 million
  • Roughly 45% of the TSX’s market capitalization is concentrated in two sectors - mining and financial services
  • The TSX is home to 174 exchange-traded funds (ETFs)
  • By 1901, the exchange was home to 100 public companies and moved into its own building in 1913
  • The TSX is not the only stock exchange in Canada, with the Montreal Stock Exchange being the second-largest exchange in the country
  • The Toronto Stock Exchange is home to the S&P/TSX Composite and S&P/TSX 60 indices, with the former showing the total weighted performance of the TSX, while the latter shows the market capitalization-weighted performance of the 60 largest constituents
  • The TSX is North America’s third-largest exchange, only behind the NYSE and Nasdaq in the U.S.
  • Securities on the TSX can be listed in two currencies, namely the USD and the CAD
  • The TMX Group, the parent company of the TSX, also owns and operates the Montreal Stock Exchange, the NES, TSXV, and the Boston Options Exchange

What Are The Listing Requirements On The Toronto Stock Exchange?

The Toronto Stock Exchange has some stringent requirements for prospective listing candidates based on their industry and initial market capitalization. Some of the general requirements include:

  • Applicants must have at least 1,000,000 freely tradable shares at the time of application
  • The shares must have an aggregate market value of at least 4 million CAD (10 million for technology companies listed under the industrial category)
  • The securities must be held by at least 300 public holders
  • If freely tradable securities are below 500,000, or the number of public holders is below 150, the exchange might delist the company 

Please note, that these are only the general requirements applicable to all stocks listed on the TSX, which upholds a number of other requirements and regulations for companies representing specific industries.

In general, there are five routes to obtaining a listing on the TSX:

  1. Initial public offering (IPO) - The traditional route where a pre-established company with years of operational experience lists its shares on the exchange
  2. Direct listing - For companies that satisfy the capitalization and stock thresholds upheld by the exchange
  3. Reverse take-over - A reverse merger, or demerger from an already existing TSX-listed public company
  4. Graduation - For companies that have been listed on the TSXV and meet the criteria to obtain a listing on the senior exchange
  5. Special Purpose Acquisition Company (SPAC) - For pools of capital merging with an existing company to take it public 

How Does The Toronto Stock Exchange Make Money?

The Toronto Stock Exchange generates revenue by charging one-time and recurring fees to companies listed on the exchange, while also providing a number of auxiliary services to institutional investors:

  • Transaction fees - The TSX charges fees on all buy and sell orders made on the exchange
  • Listing fees - Companies that want to list their securities on the TSX are required to pay listing fees. The fees may vary based on company size and listing category
  • Market data - The TSX charges fees for all the market data provided through its website about individual listings, as well as indices
  • Technology services - The TSX provides trading systems and connectivity solutions to clients
  • Clearing and settlement services - The TSX provides clearing and settlement services for trades made on its platform. The fees charged on these trades may vary based on volume 

TSX Listing And Other Fees

The Toronto Stock Exchange has a relatively simple fee structure, which can be broken down into the following:

For trading applicants:

  • $5,000 initial application fee
  • $60,000 trading applicant registration fee (one-time) 
  • $15,000 for non-trading applicants
  • $1,500 monthly membership fee

For listing applicants on the TSX:

  • Listing fees - $10,000 - $70,000
  • Accounting and auditing fees - $75,000 - $100,000
  • Legal fees - $400,000 - $750,000
  • Underwriter’s commission - 4% - 6%

For listing applicants on the TSXV:

  • Listing fees - $7,500 - $40,000
  • Accounting and auditing fees - $25,000 - $100,000
  • Legal fees - $75,000+
  • Underwriter’s commission - up to 12%

The S&P/TSX 60 Index

The S&P/TSX 60 index is the most followed index on the Toronto Stock Exchange, tracking the 60 largest stocks listed on the exchange. The index is market capitalization-weighted. 

What Is The S&P/TSX 60 Index?

The S&P/TSX 60 Index is a capitalization-weighted index that tracks 60 of the largest companies listed on the Toronto Stock Exchange. The index is maintained by the Canadian S&P Index Committee, which is a unit of Standard & Poor’s. A bulk of the weight of the index is attributable to the energy, financial, and industrial sectors. The index was officially launched on December 30, 1998. The index is part of the S&P 1200 Global Index. 

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S&P/TSX 60 Sector Weighting & Largest Constituents

The S&P/TSX index is represented by 60 of the largest public companies that list their shares on the Toronto Stock Exchange. Here’s how the index can be broken down into market sectors by weighting:

Financials 36.1%
Information Technology6.5%
Consumer Staples4.5%
Consumer Discretionary3.7%
Real Estate0.7%

As already mentioned in previous sections, the S&P/TSX index is also heavily weighted in favor of the financial services and energy sectors. 

Let’s look at the top 10 constituents of the S&P/TSX 60 by index weight:

Royal Bank of CanadaRYFinancials
Toronto-Dominion BankTDFinancials
Enbridge IncENBEnergy
Canadian Pacific Railway LtdCPIndustrials
Canadian National RailwaysCNRIndustrials
Bank of MontrealBMOFinancials
Canadian Natural Resources LimitedCNQEnergy
Bank of Nova Scotia HalifaxBNSFinancials
Shopify IncSHOPInformation Technology
Brookfield CorporationBNFinancials

The S&P/TSX Composite Index

The S&P/TSX Composite Index is the benchmark index of the Toronto Stock Exchange that represents over 70% of the market capitalization of the TSX. The index includes 250 companies in total and is a replacement for the prior TSE 300 index. 

What Is The S&P/TSX Composite Index?

The S&P/TSX Composite Index is the second-most followed index on the Toronto Stock Exchange, which is frequently used as a measure of the overall performance of the exchange. 

For stocks to be eligible for inclusion in the index, they must represent a minimum of 0.05% of the index and must trade for an average price of at least 1 CAD over the past three months. The trading volume in dollar value, as well as the number of transactions, must be at least 0.025% of all trading volume. To balance the index, there is a 15% cap in place. 

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S&P/TSX Composite Index Sector Weighting

Similarly to the S&P/TSX 60 Index, the Composite Index is dominated by a handful of industries, such as industry, financials, and energy. 

Here’s how the index is weighted by sector:

Information Technology6.2%
Consumer Staples4.2%
Consumer Discretionary3.7%
Real Estate2.6%
Health Care0.4%

The TSXV and Micro-Cap Stocks

The TSX Venture Exchange, or TSXV, is the electronic venture exchange of the Toronto Stock Exchange and is home to over 1,600 small-cap stocks that are not able to satisfy the listing requirements of the TSX. 

The listing requirements on the TSXV are less stringent and listing fees are also considerably lower. Launched in 1999, the TSXV’s total market capitalization amounts to $78 billion. However, a lot of the stocks listed on the TSXV have low trading volumes and can be highly volatile, with a higher risk of failure. 

Key Takeaways From Everything You Need To Know About The Toronto Stock Exchange

  • The Toronto Stock Exchange, or TSX, is the primary stock exchange of Canada, which consists of the senior exchange and the Venture Exchange, or TSXV
  • The TSX is the third largest stock exchange in North America
  • The exchange is home to the S&P/TSX 60 and Composite indices
  • TSX’s listing requirement can vary based on the industry and market capitalization of the listing company
  • The TSXV is designated for micro-cap stocks that cannot meet the listing criteria of the senior exchange
  • TSXV stocks have the option to eventually list on the TSX, if they manage to comply with the market capitalization and trading volume requirements 

FAQs On Everything You Need To Know About The Toronto Stock Exchange

What is the biggest stock on the Toronto Stock Exchange?

The Royal Bank of Canada (TSE:RY) is the largest stock listed on the TSX, with nearly $133.4 billion in market capitalization. 

How many stocks does the TSX have?

The TSX and TSXV are home to a combined stock count of over 3,400. The TSX is home to 1,600 individual stocks that represent various industries, such as energy, industrials, financial services, etc. 

What is the largest sector on the Toronto Stock Exchange?

The financial services sector is the largest by weighting on the Toronto Stock Exchange and accounts for over 31% of the S&P/TSX Composite Index.