History of Stock Markets

When we see news about stocks market or talk about it, usually we talk about the companies listed on BSE (Bombay Stock Exchange), NSE (National Stock Exchange) or NYSE (New York Stock Exchange) etc. We see that these days’ people invest money in market via stock market but there was the time when Stock Market wasn’t the synonym with investing.

In this article I will try to provide some insight in the evolution of stock markets.

Initially in early days in Europe moneylender started trading debt with each other, a lender with high interest rate or high risk loan might exchange it with other money lender. With the time there business evolves and they started buying and selling government debt issues to the customers or we can say to the first investors.

The first stock exchange was originated in Antwerp in 1531. All the moneylenders and brokers meet there and make deals on government, business and even individual’s debt issues. It’s hard to think about it but in this early stock exchange there was not a single transaction of shares of any company and most of the brokers and moneylender exchange or do business by selling debt bonds to each other.

The invasion of East India Companies:

In early days business of bringing spices from other countries mainly from Asian countries was very profitable. However, there were so many risk associated with this business like sea pirates, poor navigation, bad whether etc due to which it becomes a very high risk and reward investment. So, in order to decrease risk ships owners started seeking investors who can invest their money for the voyage and if ships completes the voyage successfully they share the percentage of profit with those investors.

But most these investments last for single voyage and it was difficult for the ship owner to find investors for next voyage.  But in 1600s, the French, British and Dutch governments all gave charters to the companies with East India in their names and when East India Companies formed it changed the rule of the business.

The main difference was that East India Companies was the charter that had stocks and they pay dividend based on the profits they had earned from their all the voyages and also this was the first modern Joint Stock Companies.

The East India Companies issued stocks on papers, and if investors wants’ he can sell it to other investor. But there was not any stock exchange at that time and investor would have to track broker to carry out the trade. In early day most brokers and investors in England did their business from the coffee shops around London.

Any my friends this is how Stock Markets originated and people started buying and selling shares of the companies.

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I am Daviender Thakur and I love to read about Finance, Stock Market and like to share my knowledge with others.

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