The history of stock exchanges can be traced to 12th century France, when the first brokers are believed to have developed, trading in debt and government securities. Unofficial share markets existed across Europe through the 1600s, where brokers would meet outside or in coffee houses to make trades. The Amsterdam Stock Exchange, created in 1602, became the first official stock exchange when it began trading shares of the Dutch East India Company. These were the first company shares ever issued.
The history of the earliest stock exchange, the French stock exchange, may be traced back to 12th century when transactions occurred in commercial bills of exchange. To control this budding market, Phillip, the Fair, of France (1268-1314) created the profession of couratier de change, which was the predecessor of the French stockbroker. At about the same time, in Bruges (a prosperous centre of the low countries of Europe), merchants began gathering in front of the house of the Van Der Buerse family to engage in trading. Soon the name of the family became identified with trading and in time a 'bourse' came to signify a stock exchange.
A brief history of the stock market might tell you that the world's first stock exchange was in Italy or in Egypt or even in France, but no matter where they originated, the concept of a place to trade stocks and bonds has taken firm root and stock exchanges are now the cornerstone of our financial marketplace.
More roots of stock markets are to be found at the beginning of the Industrial Revolution that began in Europe about four centuries ago. Many of the pioneer merchants of the industrial age wanted to start huge businesses, which no single merchant could raise alone. It therefore became inevitable for them to come together, pool their savings and start these businesses as partners or co-owners. The contribution of each partner to the enterprise was to be represented by a unit of ownership. This was the precursor to what we call shares. And through this, 'joint stock' companies were born.
Initially, trading in shares began as informal “hawking” in the streets of London. As the volume of shares increased with more companies floating shares (giving people opportunities to buy their shares), the need for an organized marketplace for the exchange of these shares escalated. As a result, these traders decided to be meeting at a coffeehouse, which they used as the marketplace. Eventually, they took over the coffeehouse and changed its name to 'stock exchange'.
By the early 1700s there were fully operational stock exchanges in France and England, and America followed in the later part of the century. Share exchanges became an important way for companies to raise capital for investment, while also offering investors the opportunity to share in company profits. The early days of the stock exchange experienced many scandals and share crashes, as there was little to no regulation and almost anyone was allowed to participate in the exchange.
Today, stock exchanges operate around the world, and they have become highly regulated institutions. Investors wanting to buy and sell shares must do so through a share broker, who pays to own a seat on the exchange. Companies with shares traded on an exchange are said to be 'listed' and they must meet specific criteria, which varies across exchanges. Most stock exchanges began as floor exchanges, where traders made deals face-to-face. The largest stock exchange in the world, the New York Stock Exchange, continues to operate this way, but most of the world's exchanges have now become fully electronic.
This was in the year 1773, and the first stock exchange, the London Stock Exchange, was founded. Wall Street can trace its name back to 1653. Originally it was set up for defense and not for commerce. Settlers of Dutch descent, who were always on the lookout from attacks by Native Americans and the British built a 12 foot stockade fence. Little did they know that this fence would go on to become the center of financial activity in the world. The wall lasted a good while, until 1685. At that point the wall was torn down and a new street was built. The British called it Wall Street.
The first American stock exchange was established in 1792 in New York at the intersection of Wall Street and Bond Street and it continues to be there today, having grown into one of the world's most influential stock markets. It is aptly called the New York Stock Exchange.
A brief history of stock market trading will show that the 1800s were a time of great innovation and growth for the stock market. It was in this century that government bonds, insurance and bank stocks started actively trading. It was also during this time that street trading was prohibited and the nyse found a home on Wall Street in a building of its own. Specialists were installed at particular locations on the trading floor to facilitate stock trade.
The 1900s were the time of the Industrial Revolution and saw much growth and expansion in the stock markets and their associated regulatory agencies. The Federal Reserve was set up to regulate the banking structure of the nation and New York gained popularity as the world's financial capital supplanting London as the previous financial hub.
The 1900s also saw the rise of speculators in a secondary trading market. Eventually this century was witness to one of the greatest stock market crashes in history, where stocks plunged and the Dow hit rock bottom by decreasing 89% in the period from 1929- 1932. This period immediately following the stock market crash was called The Great Depression because it saw many people lose their savings, lose their jobs and and some even lose their lives.
The stock market crash brought about much-needed regulatory changes into the stock market. The result was the passing of the Securities and Exchange Act which saw the formation of the Securities and Exchange Commission (SEC). The SEC is responsible for helping to ensure that such a crash never happens again by closely monitoring and regulating trading practices and ensuring that companies offer all relevant disclosure to the public at the time of going public.
Today there are a lot of new initiatives taken by the NYSE and other American exchanges such as a paperless office, women on the trading floor, real time stock tickers on CNN-FN and CNBC, an updated technology plan for the trading floor, global indexes, and representative offices around the world.
Beginner investors can learn a lot about the stock market by reading this and other related items outlining the brief history of stock market buoyancy and crashes - this will in turn help them understand what powers a bull or bear market
World-Stock-Exchanges.net features a list of world stock exchanges, securities commissions and other regulatory agencies, as well as stock market resources.
London Stock Exchange History - 1698
The London Stock Exchange is one of the world’s oldest stock exchanges and can trace its history back more than 300 years. The London Stock Exchange is arguably the oldest of the world's major stock exchanges. It can trace its history back to 1698, when its founder - John Castaing - began to organize the market in Jonathan's Coffee-house using a simple list of stock and commodity prices.
Starting life in the coffee houses of 17th century London, the Exchange quickly grew to become the City’s most important financial institution. Over the centuries following, the Exchange has consistently led the way in developing a strong, well-regulated stock market and today lies at the heart of the global financial community. Today, this exchange lists 3,500 companies representing 84 countries.
We are proud of our long history that has helped to build our reputation today. Here are some of the milestones in the story of the London Stock Exchange.
1698
John Castaing begins to issue “at this Office in Jonathan’s Coffee-house” a list of stock and commodity prices called “The Course of the Exchange and other things”. It is the earliest evidence of organised trading in marketable securities in London.
1698
Stock dealers are expelled from the Royal Exchange for rowdiness and start to operate in the streets and coffee houses nearby, in particular in Jonathan’s Coffee House in Change Alley.
1720
The wave of speculative fever known as the “South Sea Bubble” bursts.
1748
Fire sweeps through Change Alley, destroying most of the coffee houses. They are subsequently rebuilt.
1761
A group of 150 stock brokers and jobbers form a club at Jonathan's to buy and sell shares.
1773
The brokers erect their own building in Sweeting’s Alley, with a dealing room on the ground floor and a coffee room above. Briefly known as “New Jonathan’s”, members soon change the name to “The Stock Exchange”.
1801
On 3 March, the business reopens under a formal membership subscription basis. On this date, the first regulated exchange comes into existence in London, and the modern Stock Exchange is born.
1802
The Exchange moves into a new building in Capel Court.
1812
The first codified rule book is created.
1836
The first regional exchanges open in Manchester and Liverpool.
1845
More speculative fever – this time “Railway mania” – sweeps the country.
1854
The Stock Exchange is rebuilt.
1876
A new Deed of Settlement for the Stock Exchange comes into force.
1914
The Great War means the Exchange market is closed from the end of July until the new year. The Stock Exchange Battalion of Royal Fusiliers is formed – 1,600 volunteered, 400 never returned.
1923
The Exchange receives its own Coat of Arms, with the motto “Dictum Meum Pactum” (My Word is My Bond).
1939
The start of World War Two. The Exchange is closed for 6 days and reopens on 7 September. The floor of the House closes for only one more day, in 1945 due to damage from a V2 rocket – trading then continues in the basement.
1972
Her Majesty the Queen opens the Exchange's new 26-storey office block with its 23,000sq ft trading floor.
1973
First female members admitted to the market. The 11 British and Irish regional exchanges amalgamate with the London exchange.
1986
Deregulation of the market, known as “Big Bang”:
# Ownership of member firms by an outside corporation is allowed.
# All firms become broker/dealers able to operate in a dual capacity.
# Minimum scales of commission are abolished.
# Individual members cease to have voting rights.
# Trading moves from being conducted face-to-face on a market floor to being
performed via computer and telephone from separate dealing rooms.
# The Exchange becomes a private limited company under the Companies Act 1985.
1991
The governing Council of the Exchange is replaced with a Board of Directors drawn from the Exchange's executive, customer and user base. The trading name becomes “The London Stock Exchange”.
1995
We launch AIM – our international market for growing companies.
1997
SETS (Stock Exchange Electronic Trading Service) is launched to bring greater speed and efficiency to the market. The CREST settlement service is launched.
2000
We transfer our role as UK Listing Authority with HM Treasury to the Financial Services Authority (FSA). Shareholders vote to become a public limited company: London Stock Exchange plc.
2001
We list on our own Main Market in July. We begin our 200th anniversary celebrations.
2003
We create EDX London, a new international equity derivatives business, in partnership with OM Group. We acquire Proquote Limited, a new generation supplier of real-time market data and trading systems.
2004
We move to brand new headquarters in Paternoster Square, close to St Paul's Cathedral.
2007
The London Stock Exchange merges with Borsa Italiana, creating London Stock Exchange Group.
When people talk stocks they are usually talking about companies listed on the New York Stock Exchange (NYSE). It's the big daddy and the big leagues. From a corporate perspective, anyone who's anyone is listed there, and it can be difficult for investors to imagine a time when the NYSE wasn't synonymous with investing. But, of course, it wasn't always this way; there were many steps along the road to our current system of exchange. You may be surprised to learn that the first stock exchange thrived for decades without a single stock actually being traded.
In this article we will look at the evolution of stock exchanges, from the Venetian slates, to the British coffeehouses, and finally to the NYSE and its brethren
New York Stock Exchange - 1792
The New York Stock Exchange or NYSE is arguably the oldest, and most well known, of all the American stock markets. The NYSE was formed in 1792 when two dozen stockbrokers from New York City had the idea to organize what was then a disorganized and chaotic method of stock trading. From those humble beginnings, the NYSE has continued to grow, and today lists 2,800 companies with a total capitalization of nearly $20 trillion. In 2007 a historic merger of equals created the NYSE Euronext.
The first stock exchange in London was officially formed in 1773, a scant 19 years before the New York Stock Exchange. Whereas the London Stock Exchange (LSE) was handcuffed by the law restricting shares, the New York Stock Exchange has dealt in the trading of stocks, for better or worse, since its inception. The NYSE wasn't the first stock exchange in the U.S., however, that honor goes to the Philadelphia Stock Exchange, but it quickly became the most powerful.
Formed by brokers under the spreading boughs of a buttonwood tree, the New York Stock Exchange made its home on Wall Street. The exchange's location, more than anything else, led to the dominance that the NYSE quickly attained. It was in the heart of all the business and trade coming to and going from the United States, as well as the domestic base for most banks and large corporations. By setting listing requirements and demanding fees, the New York Stock Exchange became a very wealthy institution.
The NYSE faced very little serious domestic competition for the next two centuries. Its international prestige rose in tandem with the burgeoning American economy and it was soon the most important stock exchange in the world. The NYSE had its share of ups and downs during the same period, too. Everything from the Great Depression to the Wall Street bombing of 1920 left scars on the exchange - the 1920 bombing left 38 dead and also left literal scars on many of Wall Street's prominent buildings. The less literal scars on the exchange came in the form of stricter listing and reporting requirements.
On the international scene, London emerged as the major exchange for Europe, but many companies that were able to list internationally still listed in New York. Many other countries including Germany, France, the Netherlands, Switzerland, South Africa, Hong Kong, Japan, Australia and Canada developed their own stock exchanges, but these were largely seen as proving grounds for domestic companies to inhabit until they were ready to make the leap to the LSE and from there to the big leagues of the NYSE. Some of these international exchanges are still seen as dangerous territory because of weak listing rules and less rigid government regulation
Despite the existence of stock exchanges in Chicago, Los Angeles, Philadelphia and other major centers, the NYSE was the most powerful stock exchange domestically and internationally. In 1971, however, an upstart emerged to challenge the NYSE hegemony.
The largest stock exchange in the world by dollar volume and over 2500 listed securities.
NYSE is operated by NYSE Euronext, the holding company created by the combination of NYSE Group, Inc. and Euronext N.V. NYSE is a world leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the distribution of market data.
American Stock Exchange - 1849
The American Stock Exchange or Amex is a relatively recent addition to the world's stock markets. The history of this stock market begins with the Curb Exchange and the California Gold Rush of 1849. The Amex played an important part in the financial and business transactions associated with the mining industry in the 19th century.
In 1921, the Amex expanded its niche role to include companies that did not meet the strict standards of the NYSE. In 1998, the NASDAQ purchased Amex and it continued its history of being a niche market player, specializing in derivatives and stock options. In late 2003, the American Stock Exchange regained its independence. After only six years under the control of NASD, The Amex Membership Corporation completed an agreement to transfer control of the exchange back to its membership.
In January 2008, NYSE Euronext announced it was acquiring the American Stock Exchange for $260 million in stock. The deal was completed on October 1, 2008, and the exchange was re-branded as the NYSE Amex Equities.
NASDAQ - 1971
We've even included a relatively recent addition in this article on stock market history. That's because we recognize the importance of this particular exchange. At one time, most companies aspired to be traded on the NYSE. That changed about 15 years ago, and many large companies now trade on the NASDAQ. Founded in 1971, the National Association of Securities Dealers Automated Quotation or NASDAQ was the first stock exchange to recognize the role of electronics in stock trading.
Today, the networks of computers running the NASDAQ allow it to be the most efficient stock exchange in the world. In October 2004, the NASDAQ surpassed the average trading volume of the NYSE for the first time.
Stock Price History
The Dow Jones Industrial Average is perhaps the most prestigious of all the modern day stock indexes. With a history dating back to May 26, 1896, one of the most interesting aspects of the Dow, which is also very indicative of stock prices, is the time it took to reach each of the 1,000 point milestones. For example, when the index was first introduced it stood at 40.94 and it took roughly 76 years to reach the 1,000 mark.
The complete milestone history of the average appears in the table below:
DJIA MILESTONES
History of the Securities and Exchange Commission
Finally, an overview of American stock market history would not be complete without a mention of the Securities and Exchange Commission. The beginnings of the Securities and Exchange Commission, or SEC, dates back to the Great Crash of 1929, and the reforms that followed. Before that time, there was little need or support for regulation of the securities markets.
During the crash, not only did individual investors lose countless fortunes, the banking system collapsed too. Banks were invested heavily in the market, and the ensuing panic after the crash caused many people to pull money from their savings accounts, forcing many banks to close.
In an attempt to restore faith in capital markets, Congress passed the Securities Act of 1933 and the Securities and Exchange Act of 1934. In 1934, the Securities and Exchange Commission was established to enforce those same securities laws passed by Congress.
The Real Merchants of Venice
The moneylenders of Europe filled important gaps left by the larger banks. Moneylenders traded debts between each other; a lender looking to unload a high-risk, high-interest loan might exchange it for a different loan with another lender. These lenders also bought government debt issues. As the natural evolution of their business continued, the lenders began to sell debt issues to customers - the first individual investors.
In the 1300s, the Venetians were the leaders in the field and the first to start trading the securities from other governments. They would carry slates with information on the various issues for sale and meet with clients, much like a broker does today..)
The First Stock Exchange - Sans the Stock
Belgium boasted a stock exchange as far back as 1531, in Antwerp. Brokers and moneylenders would meet there to deal in business, government and even individual debt issues. It is odd to think of a stock exchange that dealt exclusively in promissory notes and bonds, but in the 1500s there were no real stocks. There were many flavors of business-financier partnerships that produced income like stocks do, but there was no official share that changed hands.
All Those East India Companies
In the 1600s, the Dutch, British, and French governments all gave charters to companies with East India in their names. On the cusp of imperialism's high point, it seems like everyone had a stake in the profits from the East Indies and Asia except the people living there. Sea voyages that brought back goods from the East were extremely risky - on top of Barbary pirates, there were the more common risks of weather and poor navigation.
In order to lessen the risk of a lost ship ruining their fortunes, ship owners had long been in the practice of seeking investors who would put up money for the voyage - outfitting the ship and crew in return for a percentage of the proceeds if the voyage was successful. These early limited liability companies often lasted for only a single voyage. They were then dissolved, and a new one was created for the next voyage. Investors spread their risk by investing in several different ventures at the same time, thereby playing the odds against all of them ending in disaster.
When the East India companies formed, they changed the way business was done. These companies had stocks that would pay dividends on all the proceeds from all the voyages the companies undertook, rather than going voyage by voyage. These were the first modern joint. This allowed the companies to demand more for their shares and build larger fleets. The size of the companies, combined with royal charters forbidding competition, meant huge profits for investors.
A Little Stock With Your Coffee?
Because the shares in the various East India companies were issued on paper, investors could sell the papers to other investors. Unfortunately, there was no stock exchange in existence, so the investor would have to track down a broker to carry out a trade. In England, most brokers and investors did their business in the various coffee shops around London. Debt issues and shares for sale were written up and posted on the shops' doors or mailed as a newsletter.
The South Seas Bubble Bursts
The British East India Company had one of the biggest competitive advantages in financial history - a government-backed monopoly. When the investors began to receive huge dividends and sell their shares for fortunes, other investors were hungry for a piece of the action. The budding financial boom in England came so quickly that were no rules or regulations for the issuing of shares. The South Seas Company (SSC) emerged with a similar charter from the king and its shares, and the numerous re-issues, sold as soon as they were listed. Before the first ship ever left the harbor, the SSC had used its new-found investor fortune to open posh offices in the best parts of London.
Encouraged by the success of the SSC and realizing that the company hadn't done a thing except issue shares, other "businessmen" rushed in to offer new shares in their own ventures. Some of these were as ludicrous as reclaiming the sunshine from vegetables or, better yet, a company promising investors shares in an undertaking of such vast importance that they couldn't be revealed. They all sold. Before we pat ourselves on the back for how far we've come, remember that these blind pools still exist today.
Inevitably, the bubble burst when the SSC failed to pay any dividends off its meager profits, highlighting the difference between these new share issues and the British East India Company. The subsequent crash caused the government to outlaw the issuing of shares - the ban held until 1825.
The New Kid on the Block
The Nasdaq was the brainchild of the National Association of Securities Dealers (NASD) - now called the Financial Industry Regulatory Authority (FINRA). From its inception, it has been a different type of stock exchange. It does not inhabit a physical space, as with 11 Wall Street. Instead, it is a network of computers that execute trades electronically.
The introduction of an electronic exchange made trades more efficient and reduced the bid-ask spread - a spread the NYSE wasn't above profiting from. The competition from Nasdaq has forced the NYSE to evolve, both by listing itself and by merging with Euronext to form the first trans-Atlantic exchange.
The Future: World Parity ?
The NYSE is still the largest and, arguably, most powerful stock exchange in the world. The Nasdaq has more companies listed, but the NYSE has a market capitalization that is larger than Tokyo, London and the Nasdaq combined - and the merger with Euronext will make it larger still. The NYSE, once closely tied to the fortunes of failures of the American economy, is now global. Although the other stock exchanges in the world have grown stronger through mergers and the development of their domestic economies, it is difficult to see how any of them will dislodge the 800-pound gorilla that is the New York Stock Exchange.
Market Structure in other Countries :- The structure of securities markets varies considerably from one country to another. A full cross country comparison is far beyond the scope of this text. Therefore we will instead briefly review three of the Biggest non-U.S Stock markets. They are,
1.The London,
2.Euronext, and
3.Tokyo Exchanges.
1.LONDON :-
The world's oldest stock exchange and one of the top three stock exchanges in the world. Lists around 3000 companies. Total equity turnover value of more than Ј3.5 billion.
A stock exchange provides facilities for stock brokers and traders to trade stocks, securities and other financial instruments.
Generally facilities are also provided for the issue and redemption of securities as well as other capital events including the payment of income and dividends.
To be able to trade a security on a certain stock exchange, it has to be listed there.
The stock markets can be both real and virtual. The stock exchanges with physical locations carry out the stock trading on trading floor.
In case of the virtual stock exchanges, the entire trading is done online.
Supply and demand in stock markets is driven by various factors which affect the price of stocks.
World stock exchanges are very complex and affected by local events though integration and flow of funds internationally has raised the expertise of stock exchanges in the respective countries.
Each of the international exchanges has different qualifications for listings and offers different stocks and securities.
The London stock Exchange uses an Electronic trading system dubbed SETS ( STOCK EXCHANGE ELECTRONIC TRADING SYSTEM ) for Trading in Large liquid securities. This is an electronic clearing system similar to ECNs in which buy and sell orders are submitted via computer networks and any buy and sell orders that can be crossed are executed automatically. However, less liquid shares are traded in a more traditional dealer market called as the SEAQ ( STOCK EXCHANGE AUTOMATED QUOTATIONS ) system, where market makers enter Bid and ask prices at which they are willing to Transact.
2.EURONEXT :-
Euronext was formed in 2000 by a merger of the Paris, Amsterdam, and Brussels Exchanges and itself merged with the NYSE Group in 2007, Euronext like most European exchanges , uses an electronic trading system. Its system called NSC ( for nouveau systeme de cotation or New Quotation System ) has fully automated order routing and execution. In fact, investors can enter their orders directly without contacting their Brokers. An Order submitted to the System is executed immediately if it can be crossed against an order in the public limit order book, if it cannot be executed, it is entered into the limit order book.
Euronext has established cross trading agreements with several other European exchanges such as Helsinki or Luxembourg. In 2001, it also purchased LIFFE, The London International Financial Futures and Options Exchanges.
3.TOKYO :-
The Tokyo Stock Exchange (TSE ) is another Largest in the World, measured either by trading volume or the market capitalization of its roughly 2400 listed firms. It exemplifies many of the general Trends that we have seen affecting stock markets throughout the World. In 1999, it cleared its trading flour and switched to all- electronic Trading. Its switched from a membership form of Organization to a Corporate form in 2001.
The second largest stock exchange market in the world by market value. Lists 2,271 domestic companies and 31 foreign companies, with a total market capitalization of over 5 trillion USD.
The TSE maintains three sections,
1.The first section is for large companies,
2. The second is for midsized firms and
3. The mothers section is for emerging and High Growth stocks.
About three Quarters of all listed firms trade in the Ist section and about 200 trade in the mothers section.
The two major stock market indices for the TSE are the NIKKEI 225 index, which is a price weighted average of 225 Top tier Japanese firms, and the Topic index, which is a value Weighted index of the First section companies.
Worlds first largest stock market is “New York Stock Exchange”.
Second largest is also America’s “NASDAQ Stock Exchange”.
Various stock exchanges of the World are,
AMERICA NASDAQ 100
NASDAQ COMPOSITE
NYSE U.S. 100
NYSE COMPOSITE
DOW JONES INDUSTRIALS
The history of the earliest stock exchange, the French stock exchange, may be traced back to 12th century when transactions occurred in commercial bills of exchange. To control this budding market, Phillip, the Fair, of France (1268-1314) created the profession of couratier de change, which was the predecessor of the French stockbroker. At about the same time, in Bruges (a prosperous centre of the low countries of Europe), merchants began gathering in front of the house of the Van Der Buerse family to engage in trading. Soon the name of the family became identified with trading and in time a 'bourse' came to signify a stock exchange.
A brief history of the stock market might tell you that the world's first stock exchange was in Italy or in Egypt or even in France, but no matter where they originated, the concept of a place to trade stocks and bonds has taken firm root and stock exchanges are now the cornerstone of our financial marketplace.
More roots of stock markets are to be found at the beginning of the Industrial Revolution that began in Europe about four centuries ago. Many of the pioneer merchants of the industrial age wanted to start huge businesses, which no single merchant could raise alone. It therefore became inevitable for them to come together, pool their savings and start these businesses as partners or co-owners. The contribution of each partner to the enterprise was to be represented by a unit of ownership. This was the precursor to what we call shares. And through this, 'joint stock' companies were born.
Initially, trading in shares began as informal “hawking” in the streets of London. As the volume of shares increased with more companies floating shares (giving people opportunities to buy their shares), the need for an organized marketplace for the exchange of these shares escalated. As a result, these traders decided to be meeting at a coffeehouse, which they used as the marketplace. Eventually, they took over the coffeehouse and changed its name to 'stock exchange'.
By the early 1700s there were fully operational stock exchanges in France and England, and America followed in the later part of the century. Share exchanges became an important way for companies to raise capital for investment, while also offering investors the opportunity to share in company profits. The early days of the stock exchange experienced many scandals and share crashes, as there was little to no regulation and almost anyone was allowed to participate in the exchange.
Today, stock exchanges operate around the world, and they have become highly regulated institutions. Investors wanting to buy and sell shares must do so through a share broker, who pays to own a seat on the exchange. Companies with shares traded on an exchange are said to be 'listed' and they must meet specific criteria, which varies across exchanges. Most stock exchanges began as floor exchanges, where traders made deals face-to-face. The largest stock exchange in the world, the New York Stock Exchange, continues to operate this way, but most of the world's exchanges have now become fully electronic.
This was in the year 1773, and the first stock exchange, the London Stock Exchange, was founded. Wall Street can trace its name back to 1653. Originally it was set up for defense and not for commerce. Settlers of Dutch descent, who were always on the lookout from attacks by Native Americans and the British built a 12 foot stockade fence. Little did they know that this fence would go on to become the center of financial activity in the world. The wall lasted a good while, until 1685. At that point the wall was torn down and a new street was built. The British called it Wall Street.
The year was 1790. The place was Philadelphia. The occasion was the founding of the first stock exchange in America. Two years later a group of New York merchants met to discuss how to take command of the securities business. The merchants, a group of 24 men, founded what is now known as the New York Stock Exchange. But in early 1817, the merchant group from New York, distressed at the sorry state of their stock exchange, sent a representative to Philadelphia to observe how things were being done. Upon arriving with news about the robust exchange in Philadelphia, the New York Stock and Exchange Board was soon formally organized.
Other European exchanges that opened in the 1600s and 1700s included those in Belgium, Spain, Portugal, and Sweden.
Other European exchanges that opened in the 1600s and 1700s included those in Belgium, Spain, Portugal, and Sweden.
The first American stock exchange was established in 1792 in New York at the intersection of Wall Street and Bond Street and it continues to be there today, having grown into one of the world's most influential stock markets. It is aptly called the New York Stock Exchange.
A brief history of stock market trading will show that the 1800s were a time of great innovation and growth for the stock market. It was in this century that government bonds, insurance and bank stocks started actively trading. It was also during this time that street trading was prohibited and the nyse found a home on Wall Street in a building of its own. Specialists were installed at particular locations on the trading floor to facilitate stock trade.
The 1900s were the time of the Industrial Revolution and saw much growth and expansion in the stock markets and their associated regulatory agencies. The Federal Reserve was set up to regulate the banking structure of the nation and New York gained popularity as the world's financial capital supplanting London as the previous financial hub.
The 1900s also saw the rise of speculators in a secondary trading market. Eventually this century was witness to one of the greatest stock market crashes in history, where stocks plunged and the Dow hit rock bottom by decreasing 89% in the period from 1929- 1932. This period immediately following the stock market crash was called The Great Depression because it saw many people lose their savings, lose their jobs and and some even lose their lives.
The stock market crash brought about much-needed regulatory changes into the stock market. The result was the passing of the Securities and Exchange Act which saw the formation of the Securities and Exchange Commission (SEC). The SEC is responsible for helping to ensure that such a crash never happens again by closely monitoring and regulating trading practices and ensuring that companies offer all relevant disclosure to the public at the time of going public.
Today there are a lot of new initiatives taken by the NYSE and other American exchanges such as a paperless office, women on the trading floor, real time stock tickers on CNN-FN and CNBC, an updated technology plan for the trading floor, global indexes, and representative offices around the world.
Beginner investors can learn a lot about the stock market by reading this and other related items outlining the brief history of stock market buoyancy and crashes - this will in turn help them understand what powers a bull or bear market
World-Stock-Exchanges.net features a list of world stock exchanges, securities commissions and other regulatory agencies, as well as stock market resources.
London Stock Exchange History - 1698
The London Stock Exchange is one of the world’s oldest stock exchanges and can trace its history back more than 300 years. The London Stock Exchange is arguably the oldest of the world's major stock exchanges. It can trace its history back to 1698, when its founder - John Castaing - began to organize the market in Jonathan's Coffee-house using a simple list of stock and commodity prices.
Starting life in the coffee houses of 17th century London, the Exchange quickly grew to become the City’s most important financial institution. Over the centuries following, the Exchange has consistently led the way in developing a strong, well-regulated stock market and today lies at the heart of the global financial community. Today, this exchange lists 3,500 companies representing 84 countries.
We are proud of our long history that has helped to build our reputation today. Here are some of the milestones in the story of the London Stock Exchange.
1698
John Castaing begins to issue “at this Office in Jonathan’s Coffee-house” a list of stock and commodity prices called “The Course of the Exchange and other things”. It is the earliest evidence of organised trading in marketable securities in London.
1698
Stock dealers are expelled from the Royal Exchange for rowdiness and start to operate in the streets and coffee houses nearby, in particular in Jonathan’s Coffee House in Change Alley.
1720
The wave of speculative fever known as the “South Sea Bubble” bursts.
1748
Fire sweeps through Change Alley, destroying most of the coffee houses. They are subsequently rebuilt.
1761
A group of 150 stock brokers and jobbers form a club at Jonathan's to buy and sell shares.
1773
The brokers erect their own building in Sweeting’s Alley, with a dealing room on the ground floor and a coffee room above. Briefly known as “New Jonathan’s”, members soon change the name to “The Stock Exchange”.
1801
On 3 March, the business reopens under a formal membership subscription basis. On this date, the first regulated exchange comes into existence in London, and the modern Stock Exchange is born.
1802
The Exchange moves into a new building in Capel Court.
1812
The first codified rule book is created.
1836
The first regional exchanges open in Manchester and Liverpool.
1845
More speculative fever – this time “Railway mania” – sweeps the country.
1854
The Stock Exchange is rebuilt.
1876
A new Deed of Settlement for the Stock Exchange comes into force.
1914
The Great War means the Exchange market is closed from the end of July until the new year. The Stock Exchange Battalion of Royal Fusiliers is formed – 1,600 volunteered, 400 never returned.
1923
The Exchange receives its own Coat of Arms, with the motto “Dictum Meum Pactum” (My Word is My Bond).
1939
The start of World War Two. The Exchange is closed for 6 days and reopens on 7 September. The floor of the House closes for only one more day, in 1945 due to damage from a V2 rocket – trading then continues in the basement.
1972
Her Majesty the Queen opens the Exchange's new 26-storey office block with its 23,000sq ft trading floor.
1973
First female members admitted to the market. The 11 British and Irish regional exchanges amalgamate with the London exchange.
1986
Deregulation of the market, known as “Big Bang”:
# Ownership of member firms by an outside corporation is allowed.
# All firms become broker/dealers able to operate in a dual capacity.
# Minimum scales of commission are abolished.
# Individual members cease to have voting rights.
# Trading moves from being conducted face-to-face on a market floor to being
performed via computer and telephone from separate dealing rooms.
# The Exchange becomes a private limited company under the Companies Act 1985.
1991
The governing Council of the Exchange is replaced with a Board of Directors drawn from the Exchange's executive, customer and user base. The trading name becomes “The London Stock Exchange”.
1995
We launch AIM – our international market for growing companies.
1997
SETS (Stock Exchange Electronic Trading Service) is launched to bring greater speed and efficiency to the market. The CREST settlement service is launched.
2000
We transfer our role as UK Listing Authority with HM Treasury to the Financial Services Authority (FSA). Shareholders vote to become a public limited company: London Stock Exchange plc.
2001
We list on our own Main Market in July. We begin our 200th anniversary celebrations.
2003
We create EDX London, a new international equity derivatives business, in partnership with OM Group. We acquire Proquote Limited, a new generation supplier of real-time market data and trading systems.
2004
We move to brand new headquarters in Paternoster Square, close to St Paul's Cathedral.
2007
The London Stock Exchange merges with Borsa Italiana, creating London Stock Exchange Group.
When people talk stocks they are usually talking about companies listed on the New York Stock Exchange (NYSE). It's the big daddy and the big leagues. From a corporate perspective, anyone who's anyone is listed there, and it can be difficult for investors to imagine a time when the NYSE wasn't synonymous with investing. But, of course, it wasn't always this way; there were many steps along the road to our current system of exchange. You may be surprised to learn that the first stock exchange thrived for decades without a single stock actually being traded.
In this article we will look at the evolution of stock exchanges, from the Venetian slates, to the British coffeehouses, and finally to the NYSE and its brethren
New York Stock Exchange - 1792
The New York Stock Exchange or NYSE is arguably the oldest, and most well known, of all the American stock markets. The NYSE was formed in 1792 when two dozen stockbrokers from New York City had the idea to organize what was then a disorganized and chaotic method of stock trading. From those humble beginnings, the NYSE has continued to grow, and today lists 2,800 companies with a total capitalization of nearly $20 trillion. In 2007 a historic merger of equals created the NYSE Euronext.
The first stock exchange in London was officially formed in 1773, a scant 19 years before the New York Stock Exchange. Whereas the London Stock Exchange (LSE) was handcuffed by the law restricting shares, the New York Stock Exchange has dealt in the trading of stocks, for better or worse, since its inception. The NYSE wasn't the first stock exchange in the U.S., however, that honor goes to the Philadelphia Stock Exchange, but it quickly became the most powerful.
Formed by brokers under the spreading boughs of a buttonwood tree, the New York Stock Exchange made its home on Wall Street. The exchange's location, more than anything else, led to the dominance that the NYSE quickly attained. It was in the heart of all the business and trade coming to and going from the United States, as well as the domestic base for most banks and large corporations. By setting listing requirements and demanding fees, the New York Stock Exchange became a very wealthy institution.
The NYSE faced very little serious domestic competition for the next two centuries. Its international prestige rose in tandem with the burgeoning American economy and it was soon the most important stock exchange in the world. The NYSE had its share of ups and downs during the same period, too. Everything from the Great Depression to the Wall Street bombing of 1920 left scars on the exchange - the 1920 bombing left 38 dead and also left literal scars on many of Wall Street's prominent buildings. The less literal scars on the exchange came in the form of stricter listing and reporting requirements.
On the international scene, London emerged as the major exchange for Europe, but many companies that were able to list internationally still listed in New York. Many other countries including Germany, France, the Netherlands, Switzerland, South Africa, Hong Kong, Japan, Australia and Canada developed their own stock exchanges, but these were largely seen as proving grounds for domestic companies to inhabit until they were ready to make the leap to the LSE and from there to the big leagues of the NYSE. Some of these international exchanges are still seen as dangerous territory because of weak listing rules and less rigid government regulation
Despite the existence of stock exchanges in Chicago, Los Angeles, Philadelphia and other major centers, the NYSE was the most powerful stock exchange domestically and internationally. In 1971, however, an upstart emerged to challenge the NYSE hegemony.
The largest stock exchange in the world by dollar volume and over 2500 listed securities.
NYSE is operated by NYSE Euronext, the holding company created by the combination of NYSE Group, Inc. and Euronext N.V. NYSE is a world leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the distribution of market data.
American Stock Exchange - 1849
The American Stock Exchange or Amex is a relatively recent addition to the world's stock markets. The history of this stock market begins with the Curb Exchange and the California Gold Rush of 1849. The Amex played an important part in the financial and business transactions associated with the mining industry in the 19th century.
In 1921, the Amex expanded its niche role to include companies that did not meet the strict standards of the NYSE. In 1998, the NASDAQ purchased Amex and it continued its history of being a niche market player, specializing in derivatives and stock options. In late 2003, the American Stock Exchange regained its independence. After only six years under the control of NASD, The Amex Membership Corporation completed an agreement to transfer control of the exchange back to its membership.
In January 2008, NYSE Euronext announced it was acquiring the American Stock Exchange for $260 million in stock. The deal was completed on October 1, 2008, and the exchange was re-branded as the NYSE Amex Equities.
NASDAQ - 1971
We've even included a relatively recent addition in this article on stock market history. That's because we recognize the importance of this particular exchange. At one time, most companies aspired to be traded on the NYSE. That changed about 15 years ago, and many large companies now trade on the NASDAQ. Founded in 1971, the National Association of Securities Dealers Automated Quotation or NASDAQ was the first stock exchange to recognize the role of electronics in stock trading.
Today, the networks of computers running the NASDAQ allow it to be the most efficient stock exchange in the world. In October 2004, the NASDAQ surpassed the average trading volume of the NYSE for the first time.
Stock Price History
The Dow Jones Industrial Average is perhaps the most prestigious of all the modern day stock indexes. With a history dating back to May 26, 1896, one of the most interesting aspects of the Dow, which is also very indicative of stock prices, is the time it took to reach each of the 1,000 point milestones. For example, when the index was first introduced it stood at 40.94 and it took roughly 76 years to reach the 1,000 mark.
The complete milestone history of the average appears in the table below:
DJIA MILESTONES
Milestone
|
Date
|
Time
|
1,000
|
November 14, 1972
|
76 Years
|
2,000
|
January 8, 1987
|
14 Years
|
3,000
|
April 17, 1991
|
4 Years
|
4,000
|
February 23, 1985
|
4 Years
|
5,000
|
November 21, 1995
|
9 Months
|
6,000
|
October 14, 1996
|
11 Months
|
7,000
|
February 13, 1997
|
4 Months
|
8,000
|
July 16, 1997
|
5 Months
|
9,000
|
April 6, 1998
|
9 Months
|
10,000
|
March 29, 1999
|
12 Months
|
11,000
|
May 3, 1999
|
1 Month
|
12,000
|
October 19, 2006
|
7 Years 5 Months
|
13,000
|
April 25, 2007
|
6 Months
|
14,000
|
July 17,2007
|
3 Months
|
15,000
|
?
|
?
|
Finally, an overview of American stock market history would not be complete without a mention of the Securities and Exchange Commission. The beginnings of the Securities and Exchange Commission, or SEC, dates back to the Great Crash of 1929, and the reforms that followed. Before that time, there was little need or support for regulation of the securities markets.
During the crash, not only did individual investors lose countless fortunes, the banking system collapsed too. Banks were invested heavily in the market, and the ensuing panic after the crash caused many people to pull money from their savings accounts, forcing many banks to close.
In an attempt to restore faith in capital markets, Congress passed the Securities Act of 1933 and the Securities and Exchange Act of 1934. In 1934, the Securities and Exchange Commission was established to enforce those same securities laws passed by Congress.
The Real Merchants of Venice
The moneylenders of Europe filled important gaps left by the larger banks. Moneylenders traded debts between each other; a lender looking to unload a high-risk, high-interest loan might exchange it for a different loan with another lender. These lenders also bought government debt issues. As the natural evolution of their business continued, the lenders began to sell debt issues to customers - the first individual investors.
In the 1300s, the Venetians were the leaders in the field and the first to start trading the securities from other governments. They would carry slates with information on the various issues for sale and meet with clients, much like a broker does today..)
The First Stock Exchange - Sans the Stock
Belgium boasted a stock exchange as far back as 1531, in Antwerp. Brokers and moneylenders would meet there to deal in business, government and even individual debt issues. It is odd to think of a stock exchange that dealt exclusively in promissory notes and bonds, but in the 1500s there were no real stocks. There were many flavors of business-financier partnerships that produced income like stocks do, but there was no official share that changed hands.
All Those East India Companies
In the 1600s, the Dutch, British, and French governments all gave charters to companies with East India in their names. On the cusp of imperialism's high point, it seems like everyone had a stake in the profits from the East Indies and Asia except the people living there. Sea voyages that brought back goods from the East were extremely risky - on top of Barbary pirates, there were the more common risks of weather and poor navigation.
In order to lessen the risk of a lost ship ruining their fortunes, ship owners had long been in the practice of seeking investors who would put up money for the voyage - outfitting the ship and crew in return for a percentage of the proceeds if the voyage was successful. These early limited liability companies often lasted for only a single voyage. They were then dissolved, and a new one was created for the next voyage. Investors spread their risk by investing in several different ventures at the same time, thereby playing the odds against all of them ending in disaster.
When the East India companies formed, they changed the way business was done. These companies had stocks that would pay dividends on all the proceeds from all the voyages the companies undertook, rather than going voyage by voyage. These were the first modern joint. This allowed the companies to demand more for their shares and build larger fleets. The size of the companies, combined with royal charters forbidding competition, meant huge profits for investors.
A Little Stock With Your Coffee?
Because the shares in the various East India companies were issued on paper, investors could sell the papers to other investors. Unfortunately, there was no stock exchange in existence, so the investor would have to track down a broker to carry out a trade. In England, most brokers and investors did their business in the various coffee shops around London. Debt issues and shares for sale were written up and posted on the shops' doors or mailed as a newsletter.
The South Seas Bubble Bursts
The British East India Company had one of the biggest competitive advantages in financial history - a government-backed monopoly. When the investors began to receive huge dividends and sell their shares for fortunes, other investors were hungry for a piece of the action. The budding financial boom in England came so quickly that were no rules or regulations for the issuing of shares. The South Seas Company (SSC) emerged with a similar charter from the king and its shares, and the numerous re-issues, sold as soon as they were listed. Before the first ship ever left the harbor, the SSC had used its new-found investor fortune to open posh offices in the best parts of London.
Encouraged by the success of the SSC and realizing that the company hadn't done a thing except issue shares, other "businessmen" rushed in to offer new shares in their own ventures. Some of these were as ludicrous as reclaiming the sunshine from vegetables or, better yet, a company promising investors shares in an undertaking of such vast importance that they couldn't be revealed. They all sold. Before we pat ourselves on the back for how far we've come, remember that these blind pools still exist today.
Inevitably, the bubble burst when the SSC failed to pay any dividends off its meager profits, highlighting the difference between these new share issues and the British East India Company. The subsequent crash caused the government to outlaw the issuing of shares - the ban held until 1825.
The New Kid on the Block
The Nasdaq was the brainchild of the National Association of Securities Dealers (NASD) - now called the Financial Industry Regulatory Authority (FINRA). From its inception, it has been a different type of stock exchange. It does not inhabit a physical space, as with 11 Wall Street. Instead, it is a network of computers that execute trades electronically.
The introduction of an electronic exchange made trades more efficient and reduced the bid-ask spread - a spread the NYSE wasn't above profiting from. The competition from Nasdaq has forced the NYSE to evolve, both by listing itself and by merging with Euronext to form the first trans-Atlantic exchange.
The Future: World Parity ?
The NYSE is still the largest and, arguably, most powerful stock exchange in the world. The Nasdaq has more companies listed, but the NYSE has a market capitalization that is larger than Tokyo, London and the Nasdaq combined - and the merger with Euronext will make it larger still. The NYSE, once closely tied to the fortunes of failures of the American economy, is now global. Although the other stock exchanges in the world have grown stronger through mergers and the development of their domestic economies, it is difficult to see how any of them will dislodge the 800-pound gorilla that is the New York Stock Exchange.
Market Structure in other Countries :- The structure of securities markets varies considerably from one country to another. A full cross country comparison is far beyond the scope of this text. Therefore we will instead briefly review three of the Biggest non-U.S Stock markets. They are,
1.The London,
2.Euronext, and
3.Tokyo Exchanges.
1.LONDON :-
The world's oldest stock exchange and one of the top three stock exchanges in the world. Lists around 3000 companies. Total equity turnover value of more than Ј3.5 billion.
A stock exchange provides facilities for stock brokers and traders to trade stocks, securities and other financial instruments.
Generally facilities are also provided for the issue and redemption of securities as well as other capital events including the payment of income and dividends.
To be able to trade a security on a certain stock exchange, it has to be listed there.
The stock markets can be both real and virtual. The stock exchanges with physical locations carry out the stock trading on trading floor.
In case of the virtual stock exchanges, the entire trading is done online.
Supply and demand in stock markets is driven by various factors which affect the price of stocks.
World stock exchanges are very complex and affected by local events though integration and flow of funds internationally has raised the expertise of stock exchanges in the respective countries.
Each of the international exchanges has different qualifications for listings and offers different stocks and securities.
The London stock Exchange uses an Electronic trading system dubbed SETS ( STOCK EXCHANGE ELECTRONIC TRADING SYSTEM ) for Trading in Large liquid securities. This is an electronic clearing system similar to ECNs in which buy and sell orders are submitted via computer networks and any buy and sell orders that can be crossed are executed automatically. However, less liquid shares are traded in a more traditional dealer market called as the SEAQ ( STOCK EXCHANGE AUTOMATED QUOTATIONS ) system, where market makers enter Bid and ask prices at which they are willing to Transact.
2.EURONEXT :-
Euronext was formed in 2000 by a merger of the Paris, Amsterdam, and Brussels Exchanges and itself merged with the NYSE Group in 2007, Euronext like most European exchanges , uses an electronic trading system. Its system called NSC ( for nouveau systeme de cotation or New Quotation System ) has fully automated order routing and execution. In fact, investors can enter their orders directly without contacting their Brokers. An Order submitted to the System is executed immediately if it can be crossed against an order in the public limit order book, if it cannot be executed, it is entered into the limit order book.
Euronext has established cross trading agreements with several other European exchanges such as Helsinki or Luxembourg. In 2001, it also purchased LIFFE, The London International Financial Futures and Options Exchanges.
3.TOKYO :-
The Tokyo Stock Exchange (TSE ) is another Largest in the World, measured either by trading volume or the market capitalization of its roughly 2400 listed firms. It exemplifies many of the general Trends that we have seen affecting stock markets throughout the World. In 1999, it cleared its trading flour and switched to all- electronic Trading. Its switched from a membership form of Organization to a Corporate form in 2001.
The second largest stock exchange market in the world by market value. Lists 2,271 domestic companies and 31 foreign companies, with a total market capitalization of over 5 trillion USD.
The TSE maintains three sections,
1.The first section is for large companies,
2. The second is for midsized firms and
3. The mothers section is for emerging and High Growth stocks.
About three Quarters of all listed firms trade in the Ist section and about 200 trade in the mothers section.
The two major stock market indices for the TSE are the NIKKEI 225 index, which is a price weighted average of 225 Top tier Japanese firms, and the Topic index, which is a value Weighted index of the First section companies.
Worlds first largest stock market is “New York Stock Exchange”.
Second largest is also America’s “NASDAQ Stock Exchange”.
Various stock exchanges of the World are,
AMERICA NASDAQ 100
NASDAQ COMPOSITE
NYSE U.S. 100
NYSE COMPOSITE
DOW JONES INDUSTRIALS
DOW JONES COMPOSITE
BRITAIN FTSE 100 ( pronounced footside )
CANADA TSX
FRANCE CAC 40
GERMANY DAX
HONG KONG HANG SENG
JAPAN NIKKEI 225
BRITAIN FTSE 100 ( pronounced footside )
CANADA TSX
FRANCE CAC 40
GERMANY DAX
HONG KONG HANG SENG
JAPAN NIKKEI 225
Long term returns from different countries’ stock markets
Equities
|
Bonds
|
|||
Annualized real
return
|
Cumulative
since 1900
|
Annualized real
return
|
Cumulative since
1900
|
|
7.2%
|
2,459
|
1.6%
|
5.7
|
|
2.4%
|
14
|
-0.1%
|
0.9
|
|
5.7%
|
492
|
2.2%
|
11.7
|
|
4.9%
|
202
|
3.2%
|
33.2
|
|
5.0%
|
237
|
-0.2%
|
0.8
|
|
2.9%
|
24
|
-0.1%
|
.89
|
|
2.9%
|
24
|
-1.8%
|
0.14
|
|
3.7%
|
60
|
0.9%
|
2.8
|
|
1.7%
|
6
|
-1.7%
|
0.14
|
|
3.6%
|
53
|
-1.1%
|
0.30
|
|
4.8%
|
193
|
1.5%
|
5.4
|
|
N. Zealand
|
5.8%
|
531
|
2.1%
|
10.5
|
4.1%
|
88
|
1.8%
|
7.5
|
|
7.2%
|
2,440
|
1.8%
|
7.2
|
|
3.4%
|
43
|
1.3%
|
4.3
|
|
6.1%
|
765
|
2.6%
|
17
|
|
4.1%
|
93
|
2.2%
|
11.4
|
|
5.2%
|
291
|
1.5%
|
5.4
|
|
6.2%
|
834
|
2.0%
|
9.3
|
|
World
|
5.4%
|
344
|
1.7%
|
7
|
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