The evolution of stock exchange

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Stocks are usually a list of companies trading with investors in an exchange.

It all begun with money lenders in in Europe where they traded debts between each other. It was either a personal debt or even government debts and with time, they would sell their debts to individuals who in turn became investors.

Promissory notes and bonds were later used in Belgium to conduct business transactions. In this time, there were no shares that actually got exchanged.

It later evolved to individuals putting their money in a voyage to secure the risk of traders losing their fortunes in a ship due to bad weather or pirates. Upon safe arrival of the ship, the investors would get paid back their money plus some profit, or interest. Their investment was per trip for each individual ship. This led to formation of East India Companies.

Most of the transactions happened in coffee shops since there was no stock exchange. Investors would go on a broker finding mission just so that a single transaction is carried out. Debt issues and shares were pinned up in coffee shop’s doors or sent through mail as a newsletter.

The government had supported the British East India companies so much that the investors were receiving huge dividends and sell their shares at exorbitant prices and other investors wanted to be part of this lucrative business. with no set rules and regulations, shares were traded and the South Sea Company was formed with the same concept and issued the Kings shares which sold out as soon as they were announced.

1773 brought the first stock exchange in London some 19 years prior to the New York Stock Exchange. The Philadelphia stock Exchange was the first one in the US but the NYSE became more popular within a very short time and has remained popular to date. The London Stock Exchange became and remains the major stock exchange in the whole of Europe. NYSE has remained a giant in this trade both in the US and in the international market as well until it faced serious competition in 1971.

Nasdaq which is a brainchild of the National Association of Securities Dealers (NASD), currently referred to as Financial Industry Regulatory Authority (FINRA). Nasdaq has taken the stocks exchange by storm and thanks to technology, it does not require a physical address or physical space, rather, it is a network of computers that allows trader to carry out transactions electronically.

The competition that Nasdaq has brought has made the NYSE to make drastic evolution such as listing itself in the stocks market and partnering with Euronext making them the first trans-Atlantic exchange.

Even with Nasdaq having more companies listed on its exchange, NYSE still remains the most powerful stock exchange in the world with market capitalization larger than a combination of London, Nasdaq and Tokyo, and with the new partnership with Euronext, NYSE is set to grow even bigger.

Other stock exchanges around the world have also come a long way growing in capital and companies listed with them. This they have done through merging with other exchanges and growing economies in their backyards, but they are a long way from overtaking the NYSE.

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