Trading commodities, currencies, stocks and other financial instruments has been something that was a relatively closed circle and also seen as a glamorous field until recently. Previously you needed to have a huge capital to get into the trading game. The banks were gambling with our money as we were left to deal with the consequences.
Nowadays it has been made easy and accessible for everyone and it is quickly gaining popularity with people from all different areas of life. This is because competition is higher and cost of entry has fallen significantly. In my opinion this is how it should be – the free market creates more opportunities to suit all the wants and needs of the client. Everyone should have the opportunity to gain profit from the financial trading instruments not just the rich and powerful.
In this article I am going to look into the history of trading. How it all started? How the modern stock market came to be? Where it has grown now.
How it was born
The concept of selling and trading with debt and commodities was already known way back in the Ancient times. First records of these activities have been found in Mesopotamia, there are clay tablets that show written contracts of selling debt and interest. There are different opinions to when the modern concept of stock trading started.
There were instances in the Roman Republic of organizations that performed various services for the government. One peculiar service was the feeding of geese in Capitol Hill. They did this because allegedly the geese honked and warned them of the Gallic invasion in 390 B.C. People involved in these organizations had shares. This concept was also mentioned in the materials of Cicero. In one speech, Cicero mentions “shares that had a very high price at the time.” This evidence suggests that these shares were tradable and their values could fluctuate based on the organization’s current success.
Bonds were also traded more commonly in the Italian city-states during the Renaissance period.
The Modern Stock Exchange
Later on The Dutch East India Company was formed. It was meant to build up the spice trade and operated as a ruler in the Far East. It also conducted military operations and exploited the natives of the lands it stepped foot on. The company was controlled by the directors and the shareholders didn’t have much of a say in its doings or even access to the financial statements. So the world in terms of how a huge corporation was run was not that dissimilar to today. Even though the shareholders didn’t have any control over the company they were paid dividends – over 16% was paid to the shareholders per year from 1602 to 1650.
In 1693 William of Orange issued England’s first government bonds to finance its military activities. The Bank of England was set up a year after that and soon other English stock businesses started going public.
London’s first stockbrokers conducted trades from Exchange Alley coffee houses. The beginning of the London Stock Exchange is seen as the operation of Jonathan’s Coffee House where John Castaing posted regular lists of stock and commodity prices in 1698.
The New York Stock Exchange
The start of The New York Stock Exchange which is the single biggest market in the world at the moment has been traced back to the Buttonwood Agreement. The agreement was signed by 24 brokers on May the 17th in 1792. This set a commission rate the clients were charged and bound the signers to give preference to other signers in the sales of securities.The trading started with mainly the War Bonds and First Bank of the United States stock.
The stockbrokers of New York came up with new reforms and restructured. Restrictions on manipulative trading were put in place on top of formal organs of governance. Trading in the early days took place in the Tontine Coffee House.
After the invention of the telegraph the markets consolidated and New York’s market gained control over the Philadelphia Exchange. Thereafter the Civil War stimulated speculative securities trading in New York as well. In 1869 they had to cap membership which had grown to a large amount. Trading kept growing rapidly in the second half on the 19th century until it saw dramatic changes in the 1930s resulting in an economic depression after a major stock market crash.
The New York Stock Exchange, still located at 11 Wall Street on Lower Manhattan. Currently listed at $19.69 trillion. The closing daily volume on 13th of January 2016 was over $5 billion.
Trading is gaining more popularity each year. As it has been made so easy to use and accessible for everyone. Some banks also offer day trading as a side to their current accounts now. There are a lot of new brokers and exchanges popping up everywhere and marketing is fiercer as ever. Of course there are some malicious ones around as well so one should be careful and do some research first.
Trading has been made so easy, anyone can do it. With the era of the internet everyone has access to information and education in pretty much any field there is. So if you want to become a professional trader you can educate yourself and find publications with great tutorials and info online. Not that long ago you would’ve needed to know someone or have sufficient education to enter the trading game and become successful. A lot of luck would certainly help as well.
With the birth of Bitcoin and other cryptocurrencies a huge amount of Bitcoin and cryptocurrency exchanges have risen as well. Some have also crashed and burned in this small amount of time as well – Mt. Gox for example. As technology keeps evolving I am very interested to see what this century brings. There are already so many great new currencies and opportunities that blockchain has brought us and I am sure there will be many more.
I hope you’ve enjoyed this look into the past of trading and exchanges and I hope to soon write an article on the history of Bitcoin trading and exchanges too.
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