STOCK EXCHANGE
InternetStockBroker.netStock Exchange - Background Information
Before you decide to use tackle the Stock Exchange and make use of your Free Live Stock broker Tools, I thought I would start you off with some basic background information relating to the stock Exchange. This mutual organization enables stock brokers and traders to deal in Stock and a multitude of other securities. These Stock Exchanges facilitate security issues and redemptions, and other financial services such as share dividend payments.
There are several securities traded on the Exchanges. Company share issues, derivatives, unit trusts, pooled investment goods and bonds are all part of security trading. Only securities listed on a particular Exchange are available to trade.
Stocks and Bonds are first traded in the primary market. This market is reserved for fully fledged exchange members. After the initial offering, the shares can be traded on a secondary market. Stock Exchanges are the backbone of any stock market. The market is controlled by the laws of supply & demand. This is where stock pricing enters the fold. Like all free market trades, market swings can be triggered by an unlimited variety factors such as the outbreak of war (extreme), or forecasts (variable).
Shares can be traded outside the exchanges. These, over the counter deals are conducted, the same way as Derivatives.
Stock Exchange Development
Way back in the 11th century the French "courtiers de change" acted on behalf of banking industry. They controlled agricultural debt and traded in debt notes. Many consider these French patrons as the first ever stock brokers.
Global history is a little patchy due to the lack of physical evidence. I would like to ponder a guess that the first stock brokers originated in China, going as far back as the first century. My evidence? Again, nothing concrete. China used an early form of modern paper, they were involved in an early form of gambling known as "Knucklebone," and have a strong history of international trade. Where there is gambling, there are always accountants. The Chinese had the facilities in place plus motivation to keep records. The only problem with my theory is that ancient China is shrouded in mystery. It's unlikely we will ever know the true origins.
We know that late into the 13th century, Bruges commodity traders had informal meetings at the home of Van der Burse. These informal meetings were regulated in 1309 and became known as the "Bruges Bourse." This idea spread across Europe like wild fire.
Venetian bankers were known to be trading in government securities as far back as the mid 13th century. As we know, market prices can be affected by external factors and in 1351, the Venetian Government stepped in to criminalize malicious rumors, in an attempt to stop price manipulation of government bonds.
The Dutch soon got involved and developed joint stock companies, allowing shareholders to invest in a variety of business ventures. In 1602, the Amsterdam Stock Exchange was born and issued shares for the Dutch East India Company. This was the first known company to issue stocks and bonds. In 1688, an early version of the London Stock exchange began trading in stocks.
The stock broker system spread to the USA, and on 17th May 1792, twenty four supply brokers got together to sign the "Buttonwood Agreement," at the doors of 68 Wall Street, under a buttonwood tree. Twenty five years later, on 8th March 1817 a meeting was held, resulting in a name change to the New York Stock & Exchange Board.
The 19th century saw the first known trade of "futures," and latterly "choices."
Stock Exchange Role in the Economy
Stock Exchanges have several roles in modern society. These financial roles include:
- Business capital funding
- Repositioning savings for Investment purposes
- Company growth facilitation
- Profit Sharing
- Control of corporate entities
- Minor investment opportunities
- Government fund raising for social development
- Economic measurement and control
Business funding capital
Shares may be offered publicly to fund company growth.
Repositioning savings for investment purposes
Bank saving are re-allocated to fund investments. We receive interest on our savings because the banks use a portion of our money for their own investments. The early stages of an economic recession, in 2007, saw a meltdown of UK's Northern Rock. Their over optimistic, budget-mortgage lending system backfired following a media leak, indicating they had to seek emergency funding from the Bank of England.
Company growth facilitation
Company mergers and takeover bids offer companies a chance to extend their distribution channels and product variety. In doing so, they can increase their market share. By having various streams of income they have a safety buffer, safeguarding themselves from market volatility.
Profit sharing
Investors receive share dividends based on company performance. Also, share price changes will result in either an increase or decrease in the value of the investors capital.
Control of corporate entities
Group ownership normally increase the pressure for improved management standards, to keep on par with shareholder demands. Publicly owner shared corporations must adhere to a more stringent set of rules, set in motion by the government and Stock Exchange.
Minor investment opportunities
Stock Exchanges provides the means for small-time investors to stake a claim in the same companies as major investors.
Government fund raising for social development
Governments often borrow money to finance social projects such as Education or social housing. They facilitate this by printing securities known as "Government Bonds." These bonds are, in essence, loans to the government from the public, traded on the Stock Exchange. It may reduce public taxation but if the government require funds to repay their loans, public taxation may be increased. Market volatility may result in recession.
Economic Measurement
The idea behind the Stock Exchange is that share prices are influenced by market forces, or supply and demand. If share prices drop dramatically, this can cause a negative domino effect, across the entire economy, causing a crash in the stock market. In the UK, the FTSE index was badly hit by the Northern Rock calamity, shockwave's stretched from the UK to America, and beyond.
Global Stock Exchanges (Top 10 by turnover)
| Region | Stock Exchange | Total Share Turnover (millions USD) |
|---|---|---|
| Americas | NASDAQ | 19,343,868.3 |
| Americas | New York Stock Exchange | 12,158,620.6 |
| Asia-Pacific | Shanghai Stock Exchange | 3,315,768.5 |
| Asia-Pacific | Tokyo Stock Exchange | 2,675,983.3 |
| Europe | London Stock Exchange | 2,321,518.5 |
| Asia-Pacific | Shenzhen Stock Exchange | 1,701,256.8 |
| Europe | Frankfurt Stock Exchange | 1,589,736.7 |
| Europe | Euronext | 1,195,962.2 |
| Asia-Pacific | Korea Exchange | 1,050,473.8 |
| Europe | Madrid Stock Exchange | 1,040,751.1 |
Interesting Facts about the Stock Exchange
The first three known Stock Exchanges in the World.
1460 - Antwerp Bourse
1506 - Lyons Bourse
1549 - Toulouse Bourse
1790 - Philadelphia Stock Exchange, the first ever US Stock Exchange was opened.
1867 - The first ticker tapes and stock tickers used
1896 - The first ever Wall Street Journal was published by Charles Dow.
1923 - Five billion german marks (5,000,000,000) for Croning-Schloss AG, was the highest denomination for any worldwide stock certificate
1929 - Stock market crash, signaling the beginning of hard times.
1979 - 25 cents for Pacific Stock Exchange was the lowest price paid for a membership on any of the worlds top Stock Exchanges.
2000 - Yahoo, Japan. at 167.9 million Japanese Yen was the highest ever recorded share price.
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