A History of Stock Markets
Stock markets today play a critical role in the financing of business and economic prosperity. On an individual level, the provide the platform on which multiple millions can be made in a short space of time, providing wealth unlike that possible with many other comparable pursuits. Traders across the world exchange trillions daily on exchanges and markets for securities, commodities and instruments, greasing the wheels of commerce and providing a mechanism of wholesale corporate governance. But the stock markets as we know them didn’t just emerge in a ready, advanced state, and they have an interesting story to tell over their roughly 400 year history.
Stock markets were initially developed in London as a mechanism for capital investment to fund commercial operations and expansion. The oldest known share certificate dates back to 1606, as the earliest example of companies trading equity for finance, in an occurrence that would ultimately pave the way for modern capitalism and the developed economies to which we would become accustomed.
Early share trading largely concerned shipping and expeditions to the so-called ‘new-world’ in pursuit of the spice and cotton trades. Shares were sold to fund the production of ships and pay for the costs of expeditions to the outer reaches of the known-world, as explorers and early entrepreneurs sought to make their fortunes overseas. By 1698, the trade in these securities had become formalized in the first example of a stock exchange, trading in a London coffee-house amongst wealth individuals and businessmen who would meet to price investments in different commodities and businesses.
By 1720, just over two decades after the first organized attempts at what we now know as a stock exchange, the first major crash had already bitten in the form of the ill-fated South Sea Bubble, with overeager investors rushing to plough their capital en masse into the government sponsored South Sea Company, leading to social disaster in the aftermath of the collapse in the price of its shares.
In 1997, the markets introduced electronic trading to coincide with developments in technology, which led to yet a further explosion in shares trading, and took the markets to a whole new level. Unlike ever before, it was now possible to trade the markets without a physical presence on the stock market floor, opening up trading to virtually anyone with the inclination and some capital to play with.
Today, the markets have risen to become vast exchanges of capital and funding, trading in the trillions each and every day across the globe. From Toronto to Tokyo, stock exchanges have sprung up the world over in almost all developed economies to fuel business growth and help fund government projects which in turn directly enhance quality of life and provide employment and investment opportunities for people across all sectors of society.
Without this powerful mechanism, governments and businesses alike would be unable to raise the capital they need to sustain and grow, and the private sector would be unable to provide the opportunities and choice to which we’ve become accustomed. While the markets have played an instrumental role in modernizing the world in which we live, their story no doubt holds more twists and turns, and as we move further into the 21st century the role of the markets will continue to change with the times to fulfill the needs of both investors and the organizations so reliant on private capital.