What it means
A stock exchange is a regulated market where buyers and sellers trade shares in listed companies. The Stockholm exchange does this for Swedish businesses and for some foreign companies, and it is the place where Swedish firms raise money from investors and where those investors can later sell.
For many years the exchange was an independent institution. In 1998 it combined with OM Gruppen, a derivatives and technology group that later became OMX, and in 2008 Nasdaq acquired OMX.
Since then the exchange has traded under the Nasdaq name, though people in Sweden and in finance often still use the older name. Companies are listed on different segments according to their size.
Larger companies appear on the main market, divided into large, mid and small capitalisation groups, while younger and smaller businesses often use First North, a growth market with lighter rules. Investors should know which segment a company belongs to because disclosure rules and liquidity differ between them.
The best-known benchmark is the OMX Stockholm 30 index, often shortened to OMXS30, which tracks the 30 most actively traded shares. Fund managers and analysts use it to judge performance of Swedish equities.
Shares trade in Swedish krona, so an investor from another country also carries currency risk. For a non-finance reader, the exchange matters because Swedish companies in sectors such as engineering, telecommunications, industrial goods, banking and consumer brands are listed there.
Their share prices and results are widely followed in Europe. Anyone doing business with such a company can read its filings on the exchange to understand its strength.
Listing brings obligations as well as access to capital. Companies must publish results on a regular timetable, announce price-sensitive news promptly and follow rules on governance and insider dealing.
Those requirements are the reason investors are willing to pay a fair price for the shares.
In practice
Real-world examples.
Example
A fund manager in London wants exposure to Swedish industrial companies. She buys units in an ETF that tracks the OMXS30 and gets a spread of the 30 most traded shares in one purchase. She also accepts the currency risk of holding assets priced in krona.
Example
A founder of a young Swedish software company is deciding where to list. The First North growth market has lighter reporting requirements and lower costs than the main market, which suits a firm with revenue of $15,000,000. He plans to move to the main market once the company is larger.
Example
A purchasing manager at a manufacturer in Germany is assessing the financial health of a Swedish supplier. She reads the supplier's quarterly reports published through the exchange and finds that debt is falling and cash is rising. The reports help her decide to offer a longer contract.
Case study
Seen in the real world.
Nordlys Components is an illustrative, fictional Swedish manufacturer owned by its founding family. After rapid growth it needs $60,000,000 for a new plant, and its bank is willing to lend only half of it.
The board studies a listing on the main market of the Stockholm exchange. The advisers explain the benefits, which include access to a wide pool of investors and a public price for the shares, and the costs, which include listing fees, audited quarterly reporting and the loss of some privacy.
The family decides to sell shares worth $30,000,000 and keep control of the rest, and the illustrative listing goes ahead. The lesson for the finance director is that listing gives cheaper long-term funding but permanently raises the standard of reporting expected from the business. Within a year the company hires an investor relations manager, moves to a quarterly close that finishes within three weeks and adds an independent director to chair the audit committee.
Watch out
Common mistakes.
- Thinking the exchange is still independent, when it has been part of the Nasdaq group since 2008.
- Ignoring currency risk when buying Swedish shares from abroad, when prices are quoted in krona.
- Assuming every listed company faces the same rules, when the main market and First North have different requirements.
Questions
People also ask.
What is the main index of the Stockholm exchange?
The OMX Stockholm 30, or OMXS30, which tracks the 30 most actively traded shares and is the usual benchmark for Swedish equities.
Is the Stockholm Stock Exchange the same as Nasdaq Stockholm?
Yes, Nasdaq Stockholm is the current name of the exchange, which is the same institution as the older Stockholm Stock Exchange.
What currency do shares trade in?
Most shares trade in Swedish krona, so foreign investors face exchange rate movements as well as share price movements. A fund based elsewhere may hedge this exposure, which adds a cost but removes the currency effect from returns.
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