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Stock Exchange History

According to Wikipedia, “A stock exchange, securities exchange, or (in Europe) Bourse is a corporation or mutual organization which provides trading facilities for stock brokers and traders, to trade stocks and other securities.” Facilities are also provided for the payment of income and dividends, as well as the issue and redemption of securities. In order for a stock to be traded on a certain stock exchange, it must be listed there, although this is becoming less and less popular due to the advent of electronic trading through the Electronic Communication Networks (ECNs). Trading through ECNs not only helps keep transaction cost low, but also offers the advantage of speed.

Everyone knows the New York Stock Exchange is in New York City, but where did stock exchanges come from? The first brokers are believed to have come from 11th century France, where managing and regulating the debts of agricultural communities on behalf of the banks became a concern because these brokers traded in debts. It is believed that commodity traders in Bruges gathered at the house of a man named Van der Burse in the late 13th century. This informal meeting was institutionalized in 1309 and became the Bruges Bourse. This idea spread quickly around Flanders, and Bourse soon opened in Ghent and Amsterdam.

Trading in government securities by Venetian bankers began in the middle of the 13th century. During the 14th century, people started trading in government securities in Pisa, Verona, Genoa, and Florence. Joint stock companies were later started by the Dutch. Shareholders were able to invest in ventures and receive a share of the profits or losses. The first company to issue stocks and bonds was the Amsterdam Stock Exchange. The first shares were issued on the Amsterdam Stock Exchange by the Dutch East India Company in 1602. London began trading stocks on a stock exchange in 1688.

Under a buttonwood tree, 24 New York City stockbrokers started the New York Stock Exchange on May 17, 1792, by signing the Buttonwood Agreement. The Buttonwood Agreement was the New York Stock Exchange’s commitment to investors and issuers. They eventually moved to the Tontine Coffee House to trade, while other brokers traded in the street. The first stock listed on the NYSE was the Bank of New York; there were five original stocks listed. The first NYSE members were the 24 brokers who signed the Buttonwood Agreement.


The American Stock Exchange (AMEX) in the 1800s, originally know as the curb market because trading was done outside on the curb of Broad Street in New York, began trading government securities. As the noise from so many trades increased, hand signals were created. The exchange moved indoors to its current location on Trinity Place in 1921. It was given the name of American Stock Exchange in 1953.

The AMEX is one of the largest option exchanges in the world, with more than 1,700 options traded on stocks, American Depository Receipts (ADRs), Exchange Traded Funds (ETF’s), indexes, and holders. The AMEX was the first market to trade in ETFs so they have a very extensive market in these funds. Listed on the AMEX are more than 140 ETFs on corporate bond indexes, general stock markets, industries, and more.

The AMEX is an auction market, and it conducts its trading business on a trading floor through brokers and specialists. The job of a specialist is to bring buyers and sellers together and to make sure a fair market price is received for both; each security traded on the exchange is handled by a specialist. Making sure a market remains liquid is also the job of the specialist, and this includes filling orders from his own account if no one is there to take the other side of a trade. Buy and sell orders are brought to the specialist by brokers, who move around the floor to the different specialist, bringing them orders on behalf of their clients.

In 1971, the first electronic stock exchange in the world was created: the NASDAQ. The purpose of its creation was to develop a means that would increase trading of over-the-counter (OTC) stocks, meaning those stocks which could not meet listing requirements for larger exchanges. February 8, 1971, was its first trading day, and more than 2,500 OTC stocks were traded on that first day.

In the 1990s, the NASDAQ started to become a major competitor to the NYSE. In 1994, for the first time, the NYSE came in second to the NASDAQ in annual shares traded. In 1998, the American Stock Exchange merged with the NASDAQ, this merger created the NASDAQ-AMEX Market Group. This helped both exchanges to better compete with the largest exchange in the country, the New York Stock exchange. They both, however, still operate separately.

The first truly global market place was created in 2007 with the merger of the NYSE Group and Euronext. This historic combination marked a milestone for global financial markets. Major historic market places across Europe and the United States were brought together that span more than four centuries of trading. This combination was by far the largest of its kind.

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