With more than 1,500 companies trading daily, the Toronto Stock Exchange (TSX) is Canada’s principal stock exchange, as well as the third largest in North America. The TSX boasts being the world’s primary exchange for mining and energy companies, as well as the ninth largest exchange in terms of market capitalization.
Whether you want to start investing in stocks, or you’re curious about Canada’s largest stock exchange, understanding the TSX is crucial to understanding how to invest in Canada’s top stocks. Below we’ll break down the TSX, helping you trade stocks on this major exchange.
What is the Toronto Stock Exchange (TSX)?
The Toronto Stock Exchange (TSX) is Canada’s largest marketplace for investors to buy and sell stocks. With a history that stretches back to the mid-nineteenth century, the TSX today has replaced its trading floor in Toronto with an electronic trading system (one of the first exchanges to do so). Of the more than 1,500 companies listed on the TSX, many are from the financial and mining industries, though it has a fair share of tech stocks, too.
What are the biggest stocks on the TSX?
The TSX has over 1,500 companies with a market capitalization of $2.5 trillion (the ninth largest in the world). Though stocks on the TSX often change ranking, that is, what’s the largest stock today could end up the second largest tomorrow, here’s a list of some of the biggest stocks trading currently on the TSX.
- Royal Bank of Canada (TSX:RY)
- Toronto Dominion Bank (TSX:TD)
- Shopify (TSX:SHOP)
- Brookfield Asset Management (TSX:BAM.A)
- Scotiabank (TSX:BNS)
- Canadian National Railway (TSX:CNR)
- Enbridge (TSX:ENB)
- Bank of Montreal (TSX:BMO)
- Canadian Pacific Railway (TSX:CP)
- CIBC (TSX:CM)
- Canadian Natural Resources (TSX:CNQ)
- Thomson Reuters (TSX:TRI)
How does the TSX work?
The TSX works like other stock exchanges: every day, investors trade TSX stocks, causing the prices of those stocks to fluctuate relative to investor demand.
For investors, trading on the TSX usually starts with a broker. Once you’ve opened a brokerage account, you’ll typically find the full range of TSX stocks. After you decide which TSX companies to invest in, you’ll place an order with your broker, who will execute the trade on your behalf. Since stocks on the TSX are highly liquid, trades are conducted fairly quickly; that is, for every TSX stock seller there’s usually a corresponding buyer (and vice versa). Because of the electronic nature of the TSX, computers are largely responsible for matching buyers with sellers in real time, without requiring those parties to meet and conduct a trade on their own.
Canadian companies who want to raise money for enterprise can list their stocks on the TSX, though there are requirements they must meet. For one they must have net tangible assets of at least $7.5 million. Additionally their pre-tax earnings must be $200,000 or more. If a company doesn’t meet these requirements they can still list on other stock exchanges in Canada, though they’ll have to grow larger if they want to trade on Canada’s biggest exchange.
When does the TSX open and close?
The TSX operates Monday to Friday, from 9:30a.m. to 4:00p.m. ET. That said, you can enter orders from 7:00 a.m to 9:30 a.m. ET, though they won’t be executed until the exchange opens.
For 2023, The TSX will be closed for the following holidays:
- In Lieu of New Year’s Day – Monday January 2, 2023
- Family Day – Monday, February 20, 2023
- Good Friday – Friday, April 7, 2023
- Victoria Day – Monday, May 22, 2023
- Canada Day – Monday, July 3, 2023
- Civic Holiday – Monday, August 7, 2023
- Labour Day – Monday, September 4, 2023
- Thanksgiving Day – Monday, October 9, 2023
- Christmas Day – Monday, December 25, 2023
- Boxing Day – Tuesday, December 26, 2023
What are some other stock exchanges in Canada?
An alternative to the TSX is the TSX Venture Exchange (TSXV). Founded in 1999, the TSXV was created for junior companies, that is, companies who wanted to expand, but didn’t have the assets or revenue to trade on the TSX. Today you’ll often find small high-tech companies, as well as resource exploration companies, trading on the TSXV.
Another alternative to the TSX is the Canadian Securities Exchange (CSE). Like the TSXV, the CSE has simplified listing requirements, which allow emerging companies, such as small-caps and micro-caps, to raise money for expansion and research. Unlike pink sheets and over-the-counter exchanges, however, the CSE prides itself on its oversight and regulation, which gives investors the transparency they need to invest in small companies they trust.
How can you start investing in TSX stocks?
When it comes to buying stocks on the TSX, you can typically engage in two types of strategies.
The first is day trading. As the name suggests, day trading is an investing strategy in which you buy and sell stocks within a single day. Day traders often try to take advantage of small changes in stock prices. The idea is that by profiting off numerous small changes, day traders will end the day with a fairly hefty sum.
To be clear, day trading isn’t investing. It’s trading. And, for beginners, it can be tough to pull off well. One of the reasons day trading can come back to haunt you is transaction costs. Even with some of Canada’s top brokerages, you might still pay to conduct trades. That can eat into your earnings, especially if you’re making small amounts of money per trade.
A counter strategy to day trading is long-term investing. As a long-term investor, you identify TSX stocks that you believe will rise in value over the long-run. Depending on your time horizon, that could be three, five, or even ten years from now. As long as you’ve identified a good buy—that is, a company who you believe has what it takes to be successful—your long-term investment can return some hefty gains.
If you don’t want to choose individual TSX stocks, you can also buy shares of an TSX-focused exchange-traded fund (ETF). With an ETF, you’ll track the performance of the TSX (though you won’t beat it). This can be good for investors who don’t have a tonne of money to start investing, as buying shares in an ETF will help you spread your money across numerous TSX companies, providing much-needed diversification.
Regardless of your strategy, you’ll need a brokerage to start trading TSX stocks. Just be careful about who you choose. Beginners often make the mistake of opening an account with “just anyone,” without doing the necessary research into what that broker offers. Take a moment to look at some of the benefits of Canada’s best brokerages—like fees, available research, and investment options—and you might find one that better fits your investing goals.