History of the Stock Exchange

Stock markets are dynamic and complex financial institutions that play a central role in the global economy. They serve as a platform for buying and selling company shares, enabling investors to participate in the growth of publicly traded companies. In this timeline, we explore the history of the stock market, identifying when and how major markets were founded, along with other key events.

What is a scholarship?

A stock market is a stock exchange where entities can buy and sell shares of publicly traded companies. While physical locations such as Wall Street in New York or the Royal Exchange in London have become synonymous with the stock market, most traders buy and sell stocks online. Some exchanges have even closed their physical floors to opt entirely for electronic trading, making the markets accessible to everyone.

Early origins of the stock market

Equity-like instruments can be traced back to ancient Rome, where citizens bought shares in public companies involved in multiple industries, such as construction and shipbuilding.

The concept of shares developed further in medieval Europe with the emergence of joint-stock companies, which allowed individuals to invest in forwarding and trading ventures. Merchants and traders devised multiple investment vehicles, including stock sales and partnerships.

The first fair: 1602

The first official exchange was the Amsterdam Stock Exchange, founded in 1602. Initially, only shares of the Dutch East India Company could be traded, making it the world’s first listed company. Eventually, more companies joined and the exchange introduced key features such as listing fees and regular trading hours. All this would lay the groundwork for future stock markets.

New York Stock Exchange formed: 1792

The first iteration of the New York Stock Exchange was established in 1792 with the signing of the Buttonwood Tree Agreement. This document organized securities trading between 24 different brokers on Wall Street. The daily meeting to buy and sell securities would eventually grow into the New York Stock Exchange (NYSE), now the largest stock exchange in the world.

London Stock Exchange formed: 1801

When the Royal Exchange first opened in 1571 to facilitate the exchange of trade and valuable goods, stockbrokers were not allowed to enter the building. Instead, these men facilitated securities trading at nearby Jonathon’s Coffee House because of their rowdy and unruly nature. Stockbrokers were not allowed to do business in the Royal Exchange until it was rebuilt in 1669 after it was destroyed by the Great Fire of London. In 1773, a more formal exchange was created in Sweeting’s Alley. This became the official location of the London Stock Exchange in 1801.

Hong Kong Stock Exchange formed: 1891

The Hong Kong Stock Exchange was first established as the Association of Stockbrokers in Hong Kong. It would not become known as the Hong Kong Stock Exchange until 1914. It has since become one of the largest in the world as the city has also gained prominence as a popular shipping port and business center.

Wall Street crash of 1929

Although numerous market panics occurred in the first century of the major markets’ existence, the 1929 crash was the largest to date and is widely regarded as the first full-blown market crash.

A stock market crash is a sudden and unexpected collapse in prices that affects not just a few companies or industries, but the entire economic market. The 1929 crash came after a decade of high economic prosperity, which drove prices to unsustainable levels. It was one of the main causes of the Great Depression that lasted until 1941.

NASDAQ formed: 1971

Headquartered in New York City, the NASDAQ is the most active exchange in the United States and the second largest in the world by market capitalization. It was also the first electronic exchange.

The introduction of electronic trading to the NASDAQ significantly reduced bid-ask spreads, making it an instant competitor to major exchanges like the NYSE and encouraging other exchanges to go electronic as well.

Black Monday: 1987

Black Monday was another serious market crash with major US stock markets losing up to 20% of their value. Many economists view Black Monday as a price correction after a highly inflated market, similar to the crash of 1929 in the roaring twenties.

Other factors such as a triple witches the Friday before and mass panic leading to a bank run sent what could have been a price correction spiraling out of control.

Shanghai Stock Exchange Founded: 1990

Stock trading took place in mainland China as early as the 1860s, and various forms of stock exchanges were established in subsequent decades. However, all stock exchanges were closed in 1949 after the People’s Republic of China came to power. Stocks and bonds did not trade again until the 1980s, and the current Shanghai Stock Exchange opened in December 1990.

Euronext exchange formed: 2000

Euronext was created from a merger of the Amsterdam Stock Exchange, the Brussels Stock Exchange and the Paris Stock Exchange. It was created to take advantage of the shared European currency. It is now the fourth largest exchange by market capitalization behind the NYSE, NASDAQ and China’s Shanghai Exchange.

Euronext is active in several member states of the European Union, making it a considerably complex and highly traded exchange.

Dotcom bubble: 1999 – 2000

The dot-com bubble emerged after a surge in investment in new technology failed to create the level of profit expected from the new companies. The focus of internet based companies in the crash is where the name comes from.

Financial crisis: 2008

The financial crisis was another major stock market crash after a notable bull market that encouraged speculative investors to develop subprime mortgages – risky loans offered to prospective homeowners that resulted in massive defaults by the borrowers. The real estate market had overextended these loans and then collapsed when borrowers could not pay them back.

Coronavirus crash: 2020

The rapid spread of the coronavirus effectively shut down industries and severely disrupted global trade. The selloff became so severe that several markets briefly halted trading after falling more than 10% in a single day.

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Additional Stock Market FAQs

Where did stocks first originate?

While stock-like instruments were emerging in ancient Rome and medieval Europe, the world’s first official stock exchange was established in Amsterdam, the Netherlands with one publicly traded company: the Dutch East India Company. The Amsterdam Stock Exchange played a vital role in the development of modern stock markets and introduced key features that shaped the stock markets as we know them today.

What are stock market cycles?

Stock market cycles are patterns of movement attributed to financial markets. Market cycles generally proceed in four steps: accumulation, uptrend, distribution, and downtrend.

• Accumulation: Accumulation describes when traders and investors take advantage of low prices to buy more shares than they sell. While accumulation phases occur after downtrends, as investors take advantage of low prices, they can also be driven by external economic events that encourage buying.
• Increasing trend: The uptrend, also known as markup, is the stable period after the accumulation phase where prices are rising steadily. When a stock market is in an uptrend, it is called a bull market
• Distribution: A distribution phase describes the turning point when sell orders begin to outpace buyers as stocks become overvalued
• Downward trend: In a downtrend, prices fall in what is known as a bear market. Downtrends naturally occur after a distribution phase caused by high stock prices, but they can also be caused by economic events that cause stock prices to fall even in the middle of an accumulation or upward phase

What are stock market indices?

Stock market indices are portfolios of specific stocks that are used to track their performance independently of the broader stock market. Many indices are tracked as representations of larger stock markets. The UK 100 and UK 250 are indices made up of the 100 largest and 250 second largest companies on the London Stock Exchange.

Some indices are specific to certain industries, such as the US Tech 100, also known as the NASDAQ 100, which measures the performance of the 100 largest technology companies listed in the US.