A Brief History of Stock Exchanges

Stock exchanges have been around for hundreds of years. In fact, historians have traced the origin of the first stock exchange to France somewhere around the 12th century. Brokers traded stocks along the London Exchange, hence the term “stock exchange.”

The very earliest traders recorded seem to have traded things like government securities and debt notes. Throughout the 1500s, loose, disconnected markets were formed, and unofficial trading became more and more commonplace. Brokers met in an informal manner, making trades in coffee houses and other social arenas. In fact, the first official stock exchange didn’t even come about until 1602, when the Amsterdam Stock Exchange originated. It began when traders bought and sold shares of the Dutch East India Company, which were the first company stock shares to ever be sold.

The Stock Market Matures

The stock exchanges began to get their sea legs, and then by the beginning of the 1700s, there were already official stock exchanges in full swing in both England and France. They were so official, in fact, that bigger companies began to rely on them to raise money for investments by furnishing investors the opportunity to get a cut of the company’s potential profits. Since there was no real regulation to speak of in those days, scandals and backroom deals abound. Almost everyone had a chance to participate during that time, so there was no screening process to be eligible to trade.

The Stock Market in the United States

In the US, by the end of the WWII era, the country had entered a new phase in the history of investing. People were excited to trade, and the economy was flourishing. Investors were highly optimistic, and that optimism translated to a marked increase in people investing in the stock market.

Then, the markets took a turn for the worse. At the start of the day on October 24, 1929, there was a sudden and dramatic drop in stock prices. People far and wide were selling off their shares as quickly as they could. In fact, the stock ticker was so clogged with dropping prices that it fell behind at one point. This was the event that single-handedly ushered in the great depression and caused regulation to be implemented, which resulted in the modern stock trading we engage in today.

Now more than ever, stock markets are regulated. They exist all around the world, and we are quickly becoming a global economy, so the stock exchange as we know it today may evolve exponentially in as little as ten years from now. If you want to purchase shares now, you must do so through a licensed stock broker. Although the criteria to be listed in a stock exchange varies depending on the exchange in question, it is nevertheless an extremely regulated process for a company to be listed. Stock exchanges were face-to-face trading events in decades past, but the system is now moving toward becoming fully electronic and automated.