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The term stock is usually used to refer to companies listed on the major stock exchanges such as The NYSE and NASDAQ. It is impossible to imagine a time when the bourse wasn’t synonymous with trading stocks and investing. The current system of stock exchanges was not always this way, it has undergone an evolution to become what it is today.
The Merchants of Venice
In Europe, money lenders filled the gaps left by larger banks. These lenders used to trade debts between each other. In addition, they also bought debt issues from the government. The business of money lenders evolved and they began selling debt issues to customers. These were the first individual investors.
The Venetians were the first to start trading securities from other governments in the 1300’s and the leader in this field.
Sans The Stock – The Very First Stock Exchange
Antwerp, Belgium brags of stock exchange as far back as 1531. Money lenders and brokers held meetings there to discuss individual debt issues, the government, and business. There were no real stocks in the 1500’s. For this reason, the stock exchange dealt exclusively in promissory notes and bonds. Although the myriad of businesses such as business-financier partnerships produced income as stocks do, official share never changed hands.
The East Indian Companies
The British, Dutch and French governments, in the 1600s, all issued charters to companies with East India in their names. It seemed like everyone wanted a stake in the profits from the East Indies and Asia. Since imperialism was on a high, voyages that brought goods were very risky because of pirates, the weather and poor navigation. Ship owners sought for investors who would put up money for the voyage in return for a percentage of the proceeds if the goods arrived safely. To spread their risks, investors put in money on different voyages at the same time.
The New York Stock Exchange
The first stock exchange was created in 1773 in London. 19 years later, the New York stock exchange was formed. Laws that hindered shares choked the London Stock exchange (LSE). Philadelphia Stock exchange owns the bragging rights of the first stock exchange in the US. However, NYSE quickly surpassed it to become the most powerful.
NASDAQ – The new Kid on the block
The National Association of Security Dealers (NASD), now known as FINRA, was the brain behind NASDAQ. It is unique and different from other types of stock exchange because it does not exist in a physical space like NYSE and Wall Street. Rather, it executes trades electronically via a network of computers.
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