Brief History of The Stock Market
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Brief History of The Stock Market
It is funny – I do all this writing about the markets, and finances, yet haven’t taken a moment to give some fun history of the stock market. I’m guessing most people reading this have very little knowledge of the stock market’s beginnings and how current-day markets came to be.
There are so many spots to start, like did you know the first “market” can be traced back to the 1300s? The merchants of Venice would have moneylenders trade debts with each other. These lenders eventually got into buying government debt and would trade these debts amongst various entities.
Taking it a step further the first official exchange we can credit to the Dutch in Belgium. In 1531, Antwerp had an exchange that would have brokers and moneylenders deal with all the debt issues.
That said let’s turn our attention to the U.S. stock exchange, where the very first official stock exchange was founded, of course in Philadelphia, in 1790. The Philadelphia Stock Exchange aka PHLX was not only the first exchange, but also one of the first to adopt electronic trading, dating back to 1975. Today, however, it mainly focuses on currency, index options, and equity rather than traditional stock trading.
Now, two years later, in 1792, New York decided to open their first exchange in the New York Stock Exchange aka NYSE. Didn’t take long for the NYSE to dwarf the PHLX becoming the largest and most prominent exchange in the country (soon to be the world). It opened on the famed Wall Street, which shockingly used to have a huge wall erected on it. It was built by the Dutch settlers’ intent on keeping out both the British and pirates. The NYSE became the dominant stock exchange in the world and really went unmatched for close to two hundred years.
As the US economy continued to blossom as did the NYSE. It went on to be the primary stock exchange in the world housing today over $25 trillion in market cap. It is the most active exchange in terms of volume and houses many of the world’s biggest and most influential companies.
This leaves us with the Nasdaq (National Association of Securities Dealers Automated Quotations), which wasn’t founded until 1971. Interestingly enough, the Nasdaq, albeit smaller than the NYSE and much newer, helped move exchanges into their current state. Nasdaq does not have a physical location, rather it is simply a network of computers that trade fully electronically and reduce the big-ask spread on trading. Basically, it made things more efficient and lowered friction to access stocks.
In its beginning stages, it was merely a quotation system and didn’t allow for actual trades. As of 1998, it became the first stock market in the US to trade online. Today it is one of the major world exchanges and second in volume to the NYSE.
So what?
I thought this was helpful information for a few reasons. First, quite frankly I think it is interesting. I love learning and reading about the history of different things and this is no exception. Second, and more importantly, many people think the markets started around the Great Depression. I often hear people mention they are scared the markets will go to zero or this is the end.
As you can see, we have almost 250 years of a stock market in this country alone. The markets are a long and well-developed ecosystem. One that has been tested throughout the centuries and continually provides access to incredible wealth and growth potential. Sometimes, I find it helpful to understand these things at their core level as it hopefully gives you as much confidence in these systems as myself.
Of course, we are always here to answer questions or concerns. That said here is another few hundred years of massive wealth development. Stay wealthy, healthy, and happy.
