The History Of The World’s Major Stock Markets
How a system of stock markets bankrolls the world’s financial system
According to Investopedia a stock market or stock exchange is “…exchanges or OTC markets in which shares and other financial securities of publicly held companies are issued and traded.” Examples of stocks that may be traded include Apple, Facebook, Walmart, and Target. Many nations established their own stock exchanges as they were primarily internally focused and dealing with natively formed companies, but several of these stock exchanges have dominated our world’s financial markets and have interesting histories. These institutions are crucial to understanding our financial system as fortunes are literally made and unmade on paper every day at the world’s exchanges.
The first proto stock exchange happened in Antwerp, Belgium where in the 1400’s people bought goods expected them to rise and make a profit and they also engaged in some trading of bonds. In 1611, the first stock exchange was created in Amsterdam, the Netherlands where the Dutch East India Company was the first traded company and was the only traded company on the exchange for many years. This early stock exchange history set a pattern in motion which has led to some of the greatest financial institutions in human history.
The New York City Stock Exchange, or NYSE was founded when 24 stock brokers formed the Buttonwood agreement on Wall Street in 1792. The stock exchange draws another nickname, Wall Street, from its location and the location of the signed agreement. The exchange began by focusing on bank stocks and government bonds, but it quickly expanded and this expansion helped New York City to overtake Philadelphia as the financial capital of the United States. Over the years the exchange benefited from the rise of telegraphs and telephones which allowed orders to be placed quicker and easier and today online stock movement has been a major boon to business. The collapse of the stock market as a precursor to the Great Depression in 1929 brought major government attention and regulation and as a result the exchange continues to be a fairly safe place to place investments today.
The NASDAQ, or the National Association of Securities Dealers Automated Quotations, is the largest American electronic stock exchange and hosts more companies than any other US stock exchange. The NASDAQ began trading in 1971 and in 1992 it was the first intercontinental securities exchange when it included the International Stock Exchange in London in its trades.
Shanghai is one of the world’s greatest financial cities and possesses a powerful stock market. The underpinnings of the exchange go back to the 1860’s when the business papers listed a variety of local stocks for sale. In 1891, British, French, and American businessmen founded the Shanghai Stock and Sharebrokers Association which was the first stock exchange in China. The stock exchange had two major interruptions. The first occurred when the Japanese invaded during World War II and the second was when the Communists ordered it shut in 1950 after the Communist Revolution in China. In the 1980’s there were limited attempts at trying to restart the securities industry, but they were unsuccessful for a variety of reasons including a lack of sophisticated regulation. In 1990, China restarted stock exchanges in Shanghai and Szechuan and became after Hungary the second socialist country to establish stock exchanges. It is currently one of the world’s top five stock markets.
In 1878, Japan began the Tokyo stock market as a method to trade government bonds which had been provided to former samurai. As it was began by the government initially the exchange was dominated by bonds and various forms of currency, but as of the 1920’s stocks had taken over as the dominant form of securities on the exchange. When the Americans occupied Japan at the conclusion of World War II the exchange was shut down between 1945–1949 while the Americans restructured and rebuilt the exchange, country, and economy. After the economies’ reorganization the Tokyo Stock Exchange was able to defeat its major exchange rival, the Osaka Exchange and the Tokyo Stock Exchange was the wealthiest in the world in the 1980’s until the Japanese economy largely collapsed in the 1990’s.
In Hong Kong, it took the end of World War II for the non-native and native Hong Kong stock exchanges to merge. The exchange did so well that other exchanges started to take advantage of the seemingly promised prosperity and all of these exchanges united to trade together in the 1980’s. Due to economic collapses the government instituted more securities regulation and today the exchange is still immensely profitable.
Hong Kong is not the only territory who realized that it was more profitable to combine exchanges rather than compete against one another. Europe created a pan-European stock exchange which pooled the financial markets of Amsterdam, Brussels, Dublin, Lisbon, Oslo, and Paris to create a super stock exchange in 2000. This stock exchange is a fantastic investment opportunity to investors who want to have access to diverse European financial markets.
The last of the major stock exchanges is the London Stock Exchange which began in 1698 in Jonathan’s Coffee House where John Castaing published a list of stock, currency, and commodity prices for patrons. In 1773, a few years before the beginning of the American Revolution, they moved into a formal building known as Sweetings Alley where they took the first formal steps into becoming a stock exchange. Colloquially, the building was also called New Jonathan’s after the coffee house where the stock exchange had its roots. In 1812, the year of another conflict with the United States, the stock exchange established its first rule book forbidding such things as setting off fireworks in the stock exchange. The exchange was a powerful fundraising source for Great Britain during World War I and II and it remained open throughout World War II except for one day when it suffered a direct hit from a German V2 rocket attack. As with many of the other stock exchanges the London Stock Exchange has made international partnerships with other stock exchanges including the Italian and Shanghai Stock Exchanges and has continued to be beneficially affected by changes in the technology such as the telegraph, telephone, and online ordering overtime. They have continued to be a financial juggernaut and remain one of the world’s largest stock exchanges.
The world’s securities system is large and complicated and is becoming more interconnected every day. Stock exchanges which previously operated independently and competed against one another are believing in the wisdom of consolidation and are joining with former competitors. The world’s eight leading stock exchanges are powerful forces within the global financial system and by better understanding their roots it allows for a better opportunity to predict financial options in the future. The stock exchanges have been leading financial centers for years and their future continues to look bright.
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