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Economy 101: Stocks Part 2: History

Investors around the world have traded shares of company stock via the The New York Stock Exchange, Paris Bourse, FTSE International, Tokyo Stock Exhange, and many others as long ago as the 15th century, when, in Antwerp, Belgium, prior to the existence of actual shares of stock, moneylenders would meet to trade loans and bonds.

But the history of stock and bond trading goes back much further than the history of the exchange. During the Bronze Age, Mesopotamia (modern-day Iraq) was the hub of a significant amount of economic transactions that required some system of currency. The answer lay in the advent of cuneiform, one of the earliest known forms of writing, which made possible the creation of the first stock and bond shares, which were written upon clay tablets. Cuneiform tablets were given to investors in maritime trade expeditions from as early as 2500 B.C.

The notion of buying shares in a company really took off during the 17th century though, with the formation of companies such as the East India Trading Company, which interestingly also sought fortunes in maritime trade in South Asia. Storms and pirates made these voyages extremely risky ventures, and ship owners would seek out investors who would front capital for the expeditions in return for a percentage of the profits. These companies were, in effect, the first LLCs (Limited Liability Companies), and, in the event of a successful journey, the purchase of stock in such a company would result in dividends for the investor.

Shares in the various East India companies could also be bought and sold through a broker, usually in a London coffeehouse, a couple of which eventually were bustling hubs of stock trading. The coffeehouse operations led soon enough to the building of a building known as the Stock Subscription Room and the founding of the London Stock Exchange (LSE) in 1801. The LSE has since changed locations, but is presently one of the largest stock exchanges in the world.

Around the same time that the London Stock Exchange was coming into being, a group of 24 New York stock brokers met at 68 Wall Street to sign into being what would become the New York Stock Exchange, now the largest stock exchange in the world. The New York Stock Exchange's rise to dominance can be attributed largely to its location at the mouth of the Hudson, what was at the time the entry point for all trade into and out of the United States. As both the NYSE and LSE grew to be the leading exchanges they are today, other exchanges sprung up around the globe as well. Currently, there are stock exchanges in virtually every developed country around the world, where transactions are either carried out physically on a trading floor or virtually, within a network of computers.