Brief History of the Stock Market
Exchanges have been around since 1531, when Belgium created its exchange. The Netherlands followed by establishing an exchange in Amsterdam. Shares of the famous East India Company were first traded in 1602. Capital was raised in the Amsterdam exchange to finance to pilgrim's trip to the New World. Exchanges were also established in Paris, France, and Berlin, Germany. London, England's exchange was founded in 1698 in an outdoor market. It later moved into a coffeehouse that was renamed "The Stock Exchange" in 1773.
Stock Trading in America
Stock trading in the U.S. came with the English colonists. America's first Secretary of the Treasury, Alexander Hamilton, was a big supporter of stock exchanges because he believed they were needed to develop a strong economy. Around the time of the Revolutionary War, colonial banks issued stock to raise money to support their companies.
As the United States grew in the 1800s, companies need capital to continue growing in order to keep up with demand. Selling ownership in companies via stocks was an easy way to raise money.
New York Stock Exchange
Government debt securities were first traded in 1792 at the corner of Wall Street and Broad Street in New York City, which was the national capital at the time. Business expanded to include stocks and the crowd at the corner grew. Traders organized the New York Stock and Exchange Board in a building at 40 Wall Street. This eventually became the New York Stock Exchange in 1863.
Other American Exchanges
The New York Curb Exchange was a rival to the New York Stock and Exchange Board and as the name suggests, they conducted business outside at the curbside. It was founded in 1842 and eventually became the American Stock Exchange in 1953. It became known for trading in smaller companies that the New York Stock Exchange didn't trade.
The National Association of Securities Dealers Automated Quotation (NASDAQ) was founded in 1971 as the first electronic stock market. The exchange dealt in over-the-counter securities and companies.
The Big Crash
The market became attractive to investors who could get easy credit and make a lot of money. By the 1920s, 20 million people were invested in the American stock market. That easy credit led to the crash of the stock market in 1929, which bankrupted many investors and helped move the country into the Great Depression.
Securites and Exchange Commission
In order to avoid the problems that led to the crash of 1929, Congress passed the Securities and Exchange Act that created the Securities and Exchange Commission. The commission oversees and regulates the markets.
