Stock Market History

When you think about the Stock Market history it is easy to focus on the events that led to the famous stock market crash of 1929.

While this event had a major impact on the stock market,the stock market history begins way back in 1698 and possibly even further back to 1606 when Britain, France, and the Netherlands all chartered voyages to the East Indies.

Realizing that few explorers could afford conducting overseas trade voyages, limited liability companies (LLC's) were formed.



Their goal?

Raise money from investors, who later received a share of profits based on their investment was.

In addition, governments decided to finance their wars by selling bonds, and government notes. They promised to pay "investors" out at profit at a later date.

Private banks caught on and they too began to raise money by issuing stocks, or shares of the company to investors.

This was fueled by nations like the United States who at that time where experiencing rapid growth, and companies needed capital for expansion to meet the increasing new demand.

Companies also realized that people (now called investors) were interested in buying stock, or partial ownership in companies.

This was a new market, and a new form of investing money.

It quickly grew!

London Stock Exchange

The first ever stock exchange is believed to have been the London Stock exchange. John Castaing is considered the founder.

In 1698 he organized a simple list of stock and commodity prices.

At first, there was no one building where shares were exchanged. Rather, the bulk of brokers and investors did their business at various coffee shops around London.

At this time, when companies wished to sell shares or issue debt, they posted notices on coffee shop doors or mailed newsletters to their patrons.

Jonathan’s Coffee House in Change Alley, in particular, evolved into a major hub for London’s nascent stock exchange.

Decentralized trading continued to swell at London’s coffee houses until a fire ripped through Change Alley in 1748, leading a group of wealthy traders to erect a dedicated building for the exchange in 1773.

So began what would be a lengthy tenure for Britain as the finance capital of the world. While since surpassed by the United States, London remains one of the world’s financial epicenters.

Today this exchange has over 3,500 companies representing 84 countries.


The New York Stock Exchange

The oldest (the Philadelphia Stock Exchange was older)and well known stock exchange market in the United States is the New York Stock Exchange (NYSE).

In 1792, 24 stockbrokers who lived in New York City decided to make their current stock trading more organized. In 1793, the New York Stock & Exchange Board opened for business on Wall Street.

Like its London counterpart, the NYSE started small, originally operating out of a single room. This location was destroyed by fire, prompting a relocation to Broad Street and the renaming of the exchange to the New York Stock Exchange.

It didn’t take long for the NYSE to become a financial powerhouse. According to NYSE.com, the volume of traded stocks shot up sixfold from 1896-1901.

Much of this success can be attributed to the location of the exchange in New York City, the center of virtually all business and trade in the US at the time.

The NYSE also was the first exchange to successfully institute listing requirements and fees, which generated a substantial amount of revenue for the exchange.

For over 200 years, the New York Stock Exchange stood as the unquestioned leader among all exchanges.

Today its boasts over 2,800 companies.

Nasdaq

Stock markets were once driven by manual human labor, employing squads of analysts to track trading activity and report stock prices to the public.

This changed when Nasdaq was formed in 1971. Nsdaq stands for the National Association of Securities Dealers Automated Quotation.

It was the world’s first-ever completely electronic stock market,incorporating electronic stock trading.

Instead of having buyers and sellers consult brokers to determine stock prices, NASDAQ erected a massive computerized bulletin board that listed the prices and their fluctuations in real-time.

Over the years,NASDAQ has developed and offered automated trading systems which allow investors automate the buying or selling of their shares based on criteria specified in advance.

In addition Nasdaq introduced the Small Order Execution System (SOES), a platform that let individual investors place orders of 1,000 shares or less electronically. SOES solved the then-common problem of small traders being ignored by market makers as they tried to place their orders via phone.

Much of the automation and electronic functionality of today’s markets have their origin in NASDAQ’s innovations.

The SEC is formed

As the number of investors and companies in the stock market grew, the government recognized the need for more regulation. This was especially to protect investors.

Following the great crash in 1934, and in an attempt to restore faith in the capital markets, Congress passed the Securities and Exchange Act.

This act formed the Securities and Exchange commission (SEC).

Through the rules set out by the act and succeeding amendments, the SEC's mandate is to regulate stock market trading in the United States with the help of the exchanges.

In addition, the SEC oversees the requirement that companies offer relevant information to potential investors when it issues stock to the public.

Finally, the SEC oversees the daily actions of market exchanges and how they trade the securities offered.

I hope this gives you a fascinating insight into the Stock Market History.



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