A Brief Stock Market History
With increasing reliance on technology and sophisticated processes, stock trading has come a long way from its humble beginnings. Stock market history shows how human innovation can create huge organizations that benefit everyone. Here is a brief history of how the market for stocks and other financial instruments has changed.
11th and 12th century- French debt managers
The history of the stock market can be traced back to the 11th century merchants based in Cairo. They had a well thought out system of trading as well as structured channels of payments to facilitate buying and selling. Some other historians believe that stock trading dates back to the 12th century when agricultural debts were managed by French brokers who acted on behalf of the lending banks.
13th century – the Bruges bourses
It is believed that in 13th century Bruges, people engaged in commodity trading met in the home of one Van der Burse to carry out their dealings. The name appears to have stuck to the activity because soon similar ‘bourses’ were operating in neighboring locations too. This is considered by many to be the beginning of organized stock market.
Although Venetian bankers also had a system of trading in government securities in the 13th century, it was the Dutch who actually set the stage for today’s stock markets. They developed structured institutions that distributed profits and losses among shareholders.
17th century – the first stock exchange
However, it is the Dutch East India Company, which claims the distinction of being the first company to list its shares on the stock exchange. In 1602, the company issued the first ever shares, which were listed on the Amsterdam stock exchange. This exchange ushered in continuous trade in early 17th century, setting the stage for the stock exchange functions, as we know them now.
18th century – NYSE
In 1792, the New York Stock and Exchange Board or NYSE came into being and it soon became one of the world’s most active stock exchanges. It was first started by 24 supply brokers as a means of facilitating trade in cotton. The agreement, which created this exchange, was called the Buttonwood agreement, as it was signed under a buttonwood tree. In 1817, the exchange came to be known officially as the NYSE.
NASDAQ
Technological advancements and the proliferation of the internet have made hi-tech exchanges like the NASDAQ possible. It was the first fully electronic exchange in stock market history. With its growing popularity and international links, the NASDAQ has quickly become one of the leading stock exchanges of the world.
21st century – Stock exchanges today
Today, there are numerous stock exchanges in many parts of the world, allowing investors to trade a huge volume of financial instruments. The NYSE alone accounts for about 17,000 billion dollars worth of instruments traded every month. The widespread use of such exchanges in transactions that often transcend borders led to the establishment of the World Federation of Stock Exchanges in Paris, which is an alliance of 52 leading exchanges around the world.
The beginning of derivatives trading was also an important event in stock market history. The trading volumes have increased exponentially because of derivatives. Stock exchanges have today become massive organizations, and sometimes even their own stock is publicly traded.
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