Chapter 1: Understanding the Stock market
The Origin and History of the Stock Market
Stock markets root its origin back to the period when the countries in the
New World started to trade with each other. At this time, most of the
pioneer merchants had the interest of starting a huge business but this was
impossible because such businesses required huge amounts of capital that
could not be raised by a single individual. This resulted in groups of
different investors pooling their finances together to become business
partners or co-owners. Using the shares contributed by every investor, joint-
stock companies would be created. These companies were first used by the
Dutch. The tremendous success of joint-stock companies proved to be a
valuable business module. Particularly, many businesses that were either
new or that was struggling with raising finances found this model to be very
effective for promoting their growth. The first paper share to be issued was
issued by the Dutch East India Company in 1602. With this exchangeable
medium, investors and shareholders were able to conveniently trade (buy
and sell) their stock with any other investors and shareholders.
This business model became very successful and this made the selling of
stock shares to spread to outside Dutch to their neighboring countries like
France, Spain, and Portugal. As time went by and nations accumulated
wealth, this idea continued to spread until it reached England. This trade
model became a big deal in the New World and saw the initiation of trading
ventures. The Industrial Revolution further promoted its spread because it
was almost impossible to begin private industry on your own. This business
model was just perfect for industries and companies enabling them to
acquire startup capital for their growth and expansion.
There was an influx of capital and the volume of shares in the market
increased. This called for the need to have an organized marketplace where
these shares could be bought and sold in an orderly manner. Stock traders,
consequently, decided to hold a meeting in a London coffeehouse. The
stock traders used this coffeehouse as their marketplace. After conducting
successful trades for a few years, it was time to have their own place with
their identity. Therefore, in 1773, these traders buy the coffeehouse which
they changed its name to "Stock exchange". This is how the first stock
exchange was founded. They then named the building as the London Stock
Exchange. The idea then made its way to America and in 1790 in
Philadelphia, the first stock exchange was started.
More often, the term Wall Street is also used to refer to the Stock exchange.
On May 17, 1792, the stock market on Wall Street was opened. It was
located on the corner between Wall Street and Broadway. It involved 24
supply brokers who signed the Buttonwood Agreement. Later, on 8 March
1817, the name of the group was changed to the New York Stock and
Exchange Board. They moved from their initial marketplace located in the
68 Wall Street to 40 Wall Street, New York. This was the birth of the
organization would define the word's economic future.
Today we have many stock exchanges worldwide with each of them
supplying different industries with the support necessary for their growth
and expansion. Without the funds from the stock market, many of the
revolutionary ideas we are seeing today would have never been a reality.
Furthermore, the fundamental improvements we see being made to the
existing products could have not been achieved. The stock market continues
to create financial stability as well as personal wealth through private
investment which allows companies to expand and individuals to raise their
retirement funds/ other ventures.
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