A stock market is a place where the stocks and securities of various companies are traded. It is also known as a stock exchange market. Buying and selling of financial instruments, such as securities and stocks, in a stock market is known as stock trading. A major component of a stock market is the stock exchange. The paragraphs below elaborate on when and how the stock market began.
Stock Market History
- Historical evidences reveal that the 11th century Muslim and Jewish Merchants in Cairo had a trade association and their own methods of credit and payment. This is believed to be the beginning of the stock market.
- In the 12th century, courratiers de change of France managed and regulated the debts of agricultural communities on behalf of the banks. Since these men traded with debts, they were also known as “brokers”.
- Venetian bankers traded in government securities in the 13th century.
- In the 14th century, the Dutch started joint stock companies, which encouraged the shareholders to invest in business ventures.
- In 1602, Dutch East India company established Amsterdam Stock Exchange, and they were the first company to issue stocks and bonds. The Dutch pioneered in “option trading”, “short-selling”, “debt-equity swaps”, and in other speculative financial instruments.
London Stock Exchange
This is one of the oldest stock exchanges in the world and was established in 1698. The founder of London Stock Exchange was John Castaing. Today, London Stock Exchange lists 3,500 companies, representing 84 countries.
New York Exchange
The New York Exchange is the oldest and the most well-known of all American stock markets. This was established in 1792. NYSE has a total capitalization of nearly USD 20 trillion and lists 2,800 companies.
American Stock Exchange
The American Stock Exchange is also known as Amex. This stock exchange was established in 1849, during the California Gold Rush and the Curb Exchange. The American Stock Exchange was associated with the mining industry and played a major rule during the 19th century. In 1921, it enlisted companies, which did not meet the standards of the New York Stock Exchange. In 1998, Amex was purchased by NASDAQ, but regained its independence in 2003.
Bombay Stock Exchange
One of the oldest stock exchange markets in Asia is Bombay Stock Exchange and it was established in 1875. Today, around 2,000,000 shares of stock are traded daily.
National Association of Securities Dealers Automated Quotation or NASDAQ was established in 1971. This was the first stock exchange to introduce the concept of electronics in stock trading. It is one of the most efficient stock exchanges in the world and it surpassed the average trading volume of the NYSE in October 2004.
In the initial stages of stock market, the stocks were bought and sold by individual investors who were wealthy businessmen or aristocrats. Over a period, stock market has revolutionized and today, most of the buyers and sellers are mainly large institutions such as insurance companies, companies that deal with mutual funds, exchange traded funds, group investors, and banks. Today, the economy of a country is measured by the strength of its stock market.