Source Link: https://analyzingalpha.com/stock-market-history
The stock market reflects the economic stability and growth of the country. It is believed to be the benchmark of the nation’s financial structure.
At first, merchants offer people different commodities, foreign currencies, and government bonds. This commodity market paved the way for better, broader stock exchanges wherein shares and stocks were seen as potential assets qualified for trading.
If you are one of those who are curious and interested in the stock market and how it started, here is its brief history in chronological order.
Commodity Exchange to Stock Exchange from 200 AD – 1500
The ancient city of Aizanoi, Turkey was listed as UNESCO’s World Heritage site for being the first in the world to establish a place for commodity exchanges. Commodities during the early time were classified as hard commodities and soft commodities. Big and developing countries like the United States of America, Brazil, and China invested in products and raw materials that they needed to manufacture and build infrastructure.
In the early 1100 AD, banks saw France’s ‘courtiers de change’ system as a form of trading through a brokerage. Meanwhile, government securities were traded gradually in Venice in the 13th century.
Stock Exchange began in 1415. The first stock exchange happened in Vlamingstraat Bruges, Belgium, right at the home of the Beurze family. Robert van der Buerzelt established “Ter Beurse” to hold the first-ever trading of stocks. In relation to this, the early stock market was known as Beurzen or Burges Exchange. Later, it was called Bourse, derived from the Beurze family name. By the end of the century, Antwerp, the commercial seat of Belgium, became the international center for trading.
Stock Exchange and trading from 1501 – 1600
English banking, or the Royal Exchange, was established in 1556 by Sir Thomas Gresham, a wealthy merchant based in Antwerp, and Sir Richard Clough, a prominent merchant in welsh. The Royal Exchange London was officially inaugurated and licensed to trade by Queen Elizabeth I in 1565.
Hanseatic Stock Exchange, the oldest stock exchange in Germany, was established in 1558 in Hamburg. The maritime traders involved in the “Gemener Kopmann” association were the founders of this stock exchange.
In Frankfurt, merchants used the Spring and Autumn fairs to meet and trade their businesses. After the Frankfurt Stock Exchange was built in 1585, it became the central hub for all commerce, banking, and trading in the country.
Official Stock Exchanges in 1601 – 1700
Established in 1602, Amsterdam Stock Exchange was the world’s first and official stock exchange. The Dutch East India Company (VOC) was the first to participate in the stock exchange by issuing bonds.
In 1600, Queen Elizabeth I created a British monopoly trade. The corporation was named “Governor and Company of Merchants of London trading with the East Indies.” Later on, it was called the British East India Company.
The Dutch also established their own corporation, the giant Vereenigde Oost-Indische Compagnie (VOC) or the Dutch East India Company. VOC was the first company to officially list its shares of stocks on the Amsterdam Stock Exchange.
King Christian IV wanted Copenhagen to be the center of financial trade and stock exchange, so he built the Old Stock Exchange building in 1619. The construction was completed in 1640 and became a hub for all types of merchants in and out of the country.
Berlin Stock Exchange was founded in 1685 by Elector Friedrich Willhelm. It was popularly known as “The Burgstrasse” because it was located at Burgstrasse, Berlin. At first, the place was used as a marketplace for dressmakers and chandlers. The first stock exchange happened only in 1739.
The Success of Stocks from 1701 – 1800
South Seas Company in 1711 bought rights from the British government for slavery supply. The shares were listed publicly and became successful. Millions of investors were attracted to invest, and stockholders enjoyed a 6% interest. Unfortunately, SSC collapsed in 1720. It had a bubble burst when millions of its investors pulled their shares out due to unpaid dividends. The story was then referred to as the South Sea Bubble.
Paris Stock Exchange, or Paris Bourse, was created and authorized in 1724 by the Royal Council of the State. King Louis w founded it to control the French economy. Paris Bourse moved to a new place, the Palais Royal, and later to Palais Brongniart. Bourse de Paris was closed in September 1795. After a month, it reopened officially as French Stock Exchange.
Euronext, Lisbon was among the oldest in Europe’s stock exchanges. It was changed to Lisbon Stock Exchange and founded in 1769.
Weiner Borse, or Vienna Stock Exchange, was founded in 1771 by Empress Maria Theresa in Viena, Austria. It is created to specialize in trading foreign currencies, bonds, bills of exchange, and stocks.
Philadelphia Stock Exchange was the first in the United States of America. It was established in 1790 as the City Tavern, the center for business in Philadelphia. From City Tavern to Merchants Coffee House, the Board of Brokers changed it to Philadelphia Stock Exchange, focusing on notes, bills, and bonds.
In 1792, the Buttonwood Agreement was made. The main objective of the compact was to create a system that would bring brokers and merchants into an ethical agreement. Later, it was used as the main foundation for creating the New York Stock Exchange.
Global Stock Exchange from 1801 – 1900
In 1817, the New York Stock and Exchange Board was formed. Members of the board paid for the seat to trade stocks. Among the first listed companies under the NYSE securities was the Bank of New York.
In 1819, Ludwig van Beethoven purchased eight shares of stocks from the Austrian Central Bank, the first company in Austria considered a joint-stock company.
In 1820, Frankfurt Stock Exchange began global stock trading. However, the rapid developments in stock trading and banking during this time led to a worldwide financial crisis, the Panic of 1837. A five-year economic depression also followed the Panic; thus, hundreds of banks failed.
Meanwhile, Canada came out with the Toronto Stock Exchange, developed in 1861. It was the first in Canada and the biggest, as well.
In 1878, Tokyo Stock Exchange was established as part of the western industry. Only the government bonds, silver, and gold currencies were traded here. But after modernization and significant growth of the economy, the stock trading of Japan became predominant by 1920.
Shanghai Stock and Sharebroker’s Association was founded in 1891 by merchants from France, America, and Great Britain. It was renamed as Shanghai Stock Exchange in 1904 after its registration in Hong Kong.
In 1896, the Dow Jones Industrial Average was founded by Charles Dow Jones. His innovative systems in terms of the global financial market became the standard in stock exchanges. Initially, there were 12 industrial companies included in the DJIA.
Modernization of Stock Exchange from 1901 – 2000
Globally recognized as a stock market benchmark, the S&P 500 index was pre-launched in 1923. Aside from rating mortgage bonds, it also introduced more indices from 26 industries. By 1926, more than 90 stock indices were included in the trade.
Securities and Exchange Commission was formed in 1934 after the crash of Wall Street in 1929. SEC is the regulating body of the US security market. The main objective of why it was established is to encourage companies to disclose information and keep their transparency to the trading public.
In 1941, Standard and Poor’s Corporation, or S&P 500 index, was officially launched. Investors prefer to invest passively through index funds that use the S&P 500 index as their default benchmark.
In 1970, NASDAQ, or National Association of Securities Dealers Automated Quotation, was formed. It was the old over-the-counter stock market transformed into an electronic network of around 500 traders and dealers dealing with over 4,800 stocks daily. NASDAQ set up advanced data centers for smoother electronic stock trading.
After the stock market crash in 1973-1974, the New York Stock Exchange came out with the Designated Order Turnaround in 1976. In 1980, computerized securities trading took place through Program Trading. The “Level 2” Data Feed provides broader and more in-depth real-time data.
Another stock market crash took place in 1987, and it was called Black Monday. It started in Hong Kong but created a domino effect among global stock markets.
In 1920, Electronic Communication Networks were introduced, allowing traders to place their orders through the electronic system. The improved speed, efficient output, and minimal fee attract more trading firms to invest in ECN. It significantly initiated algorithmic trading.
In 1991, Shanghai Stock Exchange resumed its operation after closing in 1950. This time the Chinese government took full control of the equities.
In 1998, Regulation Alternative Trading Systems were passed to restrict NYSE and NASDAQ monopolies. Several electronic trading platforms emerged after, and thus High-frequency trading began. It only took a few seconds to trade using HFT.
The biggest crash in stock markets happened in 2000, the new millennium era. As the system expanded with the help of the internet, new challenges and risks also arose. The dot-com bubble gave the stock market its lowest value.
The financial crisis continued to affect stock trading, resulting in a global recession. The SEC came out with a more holistic system in 2012 to address the issues. The Single-stock circuit breaker was intended to reduce another major stock market crash.
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