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History of the Stock Market

Posted By Robert On Monday, June 30th, 2014 With 0 Comments

Stock markets can trace their history, according to some historians, as far back as the 11th century. However, when studying the history of modern stock markets most experts begin their focus on the European economies from the 12th to 14th centuries. A wide array of investment trading models flourished, from France’s early debt brokers to Italy’s traders of government securities and commodities. The first joint stock companies that allowed shareholders to receive their share of profits were started by the Dutch. The first public offerings were shared on the Amsterdam Stock Exchange in 1602.

American Stock Markets

The American stock market’s development was facilitated by the first US Secretary of the Treasury, Alexander Hamilton. In the American governments beginning years, Hamilton promoted security trading in New York, after having studied the British exchanges. The corners of Broad St & Wall St in New York, then the country’s capital, served as the trading center and quickly included stocks along with government securities.

The New York Stock Exchange (NYSE) was founded in 1972 by 24 men aiming to sell shares in their companies. They charged commissions to outsiders who wanted to trade on the members behalf, thus creating the first “broker’s fee.” The New York Stock & Exchange Board formally commenced in 1817, at 40 Wall Street. Today, the NYSE is the largest stock exchange in the world, trading upwards of $10 trillion, and maintaining almost continuous operation since it launched.

With the economy booming during the Industrial Revolution of the late 19th century, investors wanted to buy shares of companies not included on the NYSE. These stocks were coined “curb trading,” because they were traded outdoors. The New York Curb Exchange was established in 1842 in order to formalize the trading of curb stocks. The New York Curb Exchange was eventually renamed the American Stock Exchange (AMEX). The exchange remained outdoors where the broker’s shouting became so loud that they developed a system of hand signals to bring order to the process. These hand signals were still used when the exchanged moved indoors in 1921.

Stock Market Crashes

The most infamous of stock market crashes is that of 1929, known as “the Crash of ’29,” which was actually a series of crashes. It began on “Black Thursday” (October 24th) with a significant drop followed by “Black Tuesday” (October 29th) when the market plummeted and left the country in panic and financial chaos. Over the course of one week $30 billion in value were lost, ten times more than the annual US budget at the time.

A more recent crash is the crash of October 1987, known as “Black Monday,” which saw the steepest single-day decline in market history. Also, a large drop occurred on September 17th, 2001, the first day the market opened after the September 11th terrorist attacks.

Stock Markets in the Computer Age

NASDAQ opened in 1971 to become the world’s first electronic stock market. After initially being used as a simple automated bulletin board system, it quickly evolved to encompass volume and trade reporting, as well as automated trading systems. The Small Order Execution System (SOES) was the first designed to provide electronic trade submissions, initiated by 1987’s “Black Monday” after many brokers refused to answer their phones.

The first intercontinental securities market was created when NASDAQ linked with the London Stock Exchange in 1992. After a merger with the American Stock Exchange in 1998, the NASDAQ-Amex Market Group, as it was then known, became the largest electronic securities market in terms of dollar value and share volume.

With technology always growing exponentially, trading has come a long way from brokers yelling on the street corners. Combining the wide exposure to personal computing and electronic markets, the NYSE and NASDAQ allowed after hours trading beginning in 1999. This gave birth to the sport of Day Trading, which was facilitated by the opportunity for several online trades to occur in a single trading period, possibly resulting large gains, or losses.

Computers have resulted in the ability for investors to trade across the globe in international markets, consequently also opening the door for the performance of one market to significantly affect the others. The increasing popularity of the web has also given investors many tools, such as online trading software and online market research resources, which allow investors to take control of their portfolio.

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