To understand the history of stocks we need to find the first antecedents of the Stock Exchange, we have to go back to the 12th century, to the commodities exchanges that arose in Europe.
These were places where merchants and traders met to buy and sell all kinds of commodities. A little later, in the 12th century, merchants in Venice began trading in government bonds, a practice that in the following years began to spread to the regions of Pisa, Verona, Genoa, and Florence.
Who invented stocks?
Over the years, these practices gradually moved inland, finally settling in the 14th century in Belgium, in the cities of Bruges and Antwerp, the hometown of the influential Van Der Buërse family. Members of the family were known as the first financial advisors and brokers.
The term "stock exchange" appeared, as mentioned above, in Bruges, Belgium, specifically in the banking family Van Der Buërse, in whose palace a securities market was organized. In 1460 the Antwerp Stock Exchange was created, which was the first stock exchange institution in the modern sense.
The typical stock market operations that had begun to develop at the fairs, especially in the old commodities exchanges, continued at this exchange, but new ones appeared, as well as gambling and speculation.
It was in Antwerp that maritime and life insurance, games of chance (very similar to today's lotteries), betting and, together with the buying and selling of merchandise, operations on public funds issued by various States appeared.
It is interesting to note that the first item on which speculation was rampant on the Antwerp Stock Exchange was pepper.
The "Handelsbeurs" (New Exchange) was built in 1531, as the Old Exchange on Hofstraat had become too small. It was the first exchange ever built specifically for this use and became the model for other exchanges all over the world.
Subsequently, the London Stock Exchange was created in 1570. Thomas Gresham, its founder, managed to emancipate England from the Antwerp market in terms of monetary needs, sustaining it on the capitalist potential of the country itself.
What was the first stock market?
However, it was not until 1602 that the first official stock market was created: the Amsterdam Stock Exchange. The emergence of this new financial market was driven by the formation of the British East India Company in 1600.
Considered the world's first joint stock company, it was responsible for sailing to the East in search of riches. The main risk of this company was the possible loss of goods due to the difficulty of the voyages or pirate attacks.
Therefore, instead of putting all their money into one expedition, investors could buy shares in different companies and diversify their risk. Seeing that this was a very interesting business model, this type of company spread throughout Europe, until in 1602 the Dutch East India Company was created, whose shares could only be sold on the Amsterdam Stock Exchange.
While it is true that there were earlier stock markets that came before Amsterdam’s, this one is considered the first because it had something that its predecessors did not: stocks. The early stock markets had infrastructures, but no one was trading shares of companies. These markets dealt with businesses, individual debts, and government affairs.
What was the first stock traded?
In 1611, the Amsterdam Stock Exchange was built, where the first shares were traded. Although commodities still played a major role, a stock market was initiated on this exchange. In 1610 the first shares belonging to the Dutch East India Company (VOC) were listed and were the subject of great speculation.
The VOC was involved in all types of trade, including transport and the slave trade. Dutch East India Company was the first to use a limited liability formula.
When was the stock market created?
This part of the story is somewhat unique. As VOC shares were in the form of handwritten sheets of paper, investors sold these papers or traded these "stocks" with other investors in coffee shops.
Stock markets did not start in the magnificent buildings, popular and proper of this business. There was no stock exchange, it did not exist. Therefore, investors had to find a broker in order to make a trade, and this happened in coffee shops.
In England, although investors did business in various coffee houses around the city of London, the best known for that purpose (as it was the preferred meeting place for brokers) was Jonathan's Coffee House, which was used to post prices of stocks and commodities, as well as debt issues, and shares for sale. Those were also mailed as newsletters.
In the case of New York, it was the Tontine Coffee House that was built by brokers to be used as a meeting place for trading and correspondence. In short, the stock market was created in coffee shops.
The stock market spreads around the world
In the early 1700s, new official scholarships were born in France and England, followed by America. Stock markets became very important for companies. The sale of shares allowed these companies to finance the construction and expansion of their businesses while offering investors the opportunity to share in the company's profits.
Initially, the stock market had many scandals because there was little or no regulation.
Despite the creation of the first stock exchange in Holland, the exchange of company securities, in general, was somewhat chaotic and rudimentary. For example, at the end of the 17th century in London (which would later become the nerve center of Europe's stock markets) securities trading took place in a small alley in the city, which came to be called "Change alley".
Year after year the alley grew and became more crowded, but it was not until 1801 that the trading of shares was moved to the "securities subscription room" and the first regulation of this market was created, marking what was to be the germ of the London Stock Exchange as we know it.
Meanwhile, as the years went by, the Industrial Revolution arrived, turning the industry into the main engine of the economy of the time. Thus, companies began to emerge with the need for new capital vital to the development of the new industry. This growth in search of new sources of money expanded the stock exchanges to other countries and new stock exchanges were founded, such as Paris in 1794 and Tokyo almost a century later, in 1878.
However, if there is any stock exchange creation that should be highlighted in this period, it would be that of the New York Stock Exchange. Its antecedents date back to 1792 when 24 port traders and brokers signed the agreement known as the Buttonwood Agreement, which established rules for stock trading. It was created in 1817, when a group of stockbrokers organized a committee called the New York Stock and Exchange Board (NYSE) in order to control the flow of shares that were freely traded at that time, mainly on the sidewalk of Wall Street.
Finally, in 1863 it was renamed "New York Stock Exchange" (NYSE), and thanks to the accelerated growth of the North American country, together with the end of the Civil War, it ended up displacing the London market and became the central axis of the stock markets.
In Spain, a 19th century full of wars forced the Spanish state to issue a large volume of public funds to cover its treasury needs. This accelerated the process of creating the Spanish stock exchanges. In 1831, the Madrid Stock Exchange was born. A few decades later, the Bilbao (1889) and Barcelona (1915) stock exchanges were established.