History of The Stock Markets

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History of The Stock Market

Stock markets are some of the most important parts of today’s global economy. Countries around the world depend on stock markets for economic growth.
However, stock markets are a relatively new phenomenon. They haven’t always played an important role in global economics. Today, I’m going to share the history of the stock market and explain why stock markets have become the driving economic force they are today.

Early stock and commodity markets

The first genuine stock markets didn’t arrive until the 1500s. However, there were plenty of early examples of markets which were similar to stock markets.

In the 1100s, for example, France had a system where courretiers de change managed agricultural debts throughout the country on behalf of banks. This can be seen as the first major example of brokerage because the men effectively traded debts.

Later on, the merchants of Venice were credited with trading government securities as earl y as the 13th century. Soon after, bankers in the nearby Italian cities of Pisa, Verona, Genoa, and Florence also began trading government securities.

The world’s first stock markets (without stocks)

The world’s first stock markets are generally linked back to Belgium. Bruges, Flanders, Ghent, and Rotterdam in the Netherlands all hosted their own “stock” market systems in the 1400s and 1500s.

However, it’s generally accepted that Antwerp had the world’s first stock market system. Antwerp was the commercial center of Belgium and it was home to the influential Van der Beurze family. As a result, early stock markets were typically called Beurzen.

All of these early stock markets had one thing missing: stocks. Although the infrastructure and institutions resembled today’s stock markets, nobody was actually trading shares of a company. Instead, the markets dealt with the affairs of government, businesses, and individual debt. The system and organization was similar, although the actual properties being traded were different.

The world’s first publically traded company

The East India Company is widely recognized as the world’s first publically traded company. There was one simple reason why the East India Company became the first publically traded company: risk. Put simply, sailing to the far corners of the planet was too risky for any single company. When the East Indies were first discovered to be a haven of riches and trade opportunities, explorers sailed there in droves. Unfortunately, few of these voyages ever made it home. Ships were lost, fortunes were squandered, and financiers realized they had to do something to mitigate all that risk.

As a result, a unique corporation was formed in 1600 called “Governor and Company of Merchants of London trading with the East Indies”. This was the famous East India Company and it was the first company to use a limited liability formula.

Investors realized that putting all their “eggs into one basket” was not a smart way to approach investment in East Indies trading. Let’s say that a ship returning from the East Indies had a 33% chance of being seized by pirates. Instead of investing in one voyage and risking the loss of all invested money, investors could purchase shares in multiple companies. Even if one ship was lost out of 3 or 4 invested companies, the investor would still make a profit.

The formula proved to be very successful. Within a decade, similar charters had been granted to other businesses throughout England, France, Belgium, and the Netherlands.

In 1602, the Dutch East India Company officially became the world’s first publically traded company when it released shares of the company on the Amsterdam Stock Exchange. Stocks and bonds were issued to investors and each investor was entitled to a fixed percentage of East India Company’s profits.

Selling stocks in coffee shops

Before investors yelled across trade floors and threw order forms into the air, they conducted business in coffee shops. Early stocks were handwritten on sheets of paper, and investors traded these stocks with other investors in coffee shops.

In other words, coffee shops were the first real stock markets due to the fact that investors would visit these markets to buy and sell stocks. Before long, somebody realized that the entire business world would be more efficient if somebody made a dedicated marketplace where businessmen could trade stocks without having to order a coffee or yell across a crowded café.

The first stock market bubble

Nobody really understood the importance of the stock market in those early days. People realized it was powerful and valuable, but nobody truly understood exactly what it would become.

That’s why the early days of the stock market were like the Wild West. In London, businesses would open up overnight and issue stocks and shares of some crazy new venture. In many cases, companies were able to make thousands of pounds before a single ship had ever left harbor.

There was no regulation and few ways to distinguish legitimate companies from illegitimate companies. As a result, the bubble quickly burst. Companies stopped paying dividends to investors and the government of England banned the issuing of shares until 1825.

The first stock exchange

Despite the ban on issuing shares, the London Stock Exchange was officially formed in 1801. Since companies were not allowed to issue shares until 1825, this was an extremely limited exchange. This prevented the London Stock Exchange from preventing a true global superpower.

That’s why the creation of the New York Stock Exchange (NYSE) in 1817 was such an important moment in history.

The NYSE has traded stocks since its very first day. Contrary to what some may think, the NYSE wasn’t the first stock exchange in the United States. The Philadelphia Stock Exchange holds that title. However, the NYSE soon became the most powerful stock exchange in the country due to the lack of any type of domestic competition and its positioning at the center of U.S. trade and economics in New York.

The London Stock Exchange was the main stock market for Europe, while the New York Stock Exchange was the main exchange for America and the world.

Source : https://bebusinessed.com/history/history-of-the-stock-market/

Rushcourt71

The East India Company was also one of the most fascist, evil, grotesque, revolting, disgusting, ugly and financially repressive businesses the world has ever seen.

While not quite a 20th century corporation like Exxon, it soon functioned as an aggressive private empire equipped with its own armies, executive and legislative abilities and much later as an official state within other states and kingdoms.