When you hear the words "stock exchange," what do you think? Maybe your mind conjures up an image of Wall Street men in suits closely watching numbers on a screen and rushing around the floor, or maybe you think of the app you use to monitor your own investments. What might surprise you, if you haven't taken a dive into the history of the stock exchange, is that this mode of economic exchange has historical roots from over four centuries ago. What began as a way to finance long trade voyages and make money off of imported goods in the 17th century Netherlands is now, some would say, the backbone of the free market economic system. Read on for a brief primer on some of the biggest stories in the history of the stock market.
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The First Official Stock Exchange
Founded in 1602, the Amsterdam Stock Exchange is the first official known stock exchange. Initially, the need for a stock exchange grew out of the trading business of the Dutch East India Company (VOC), one of the earliest businesses involved in trading goods within Asia and between Europe and Asia.
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The Dutch East India Company was a joint-stock company, in which financiers would buy shares to help fund the long sea voyages. The Amsterdam Stock Exchange still functions today and is considered the oldest and longest-running stock exchange in the world.
Image: a fire-damaged ship of the Dutch East India Company, circa 1690.
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The World's Oldest Share Certificate
Dated September 9th, 1606, the world's oldest share certificate survives to this day. It was issued by the Dutch East India Company chamber of Enkhuizen, and made out to the Enkhuizen inhabitant "Pieter Hermanszoon boode" (Pieter Harmensz).
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In 2010, a history student at Utrecht University in the Netherlands stumbled upon the certificate while doing archival research for his Master's thesis. It's currently housed in the Enkhuizen city archives, in the Westfries Archief in Hoorn, the Regional Historic Centre for eastern West-Friesland, Netherlands.
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A detailed illustrated rendering of the Amsterdam Stock Exchange in the early 17th century. There were, in fact, independent systems of asset valuation and exchange before the Amsterdam Stock Exchange, most notably the Antwerp Bourse. But to get super technical about it, the Amsterdam Stock Exchange was the first instance of a "stock" exchange in the world.
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The Antwerp Bourse
The bourse of Antwerp, Belgium, was the first public building constructed specifically for the exchange of financial and commodity (though it predates the existence of "stocks" and "shares," specifically). It was built in 1531.
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The architecturally intricate, beautiful space fell into disuse in the 17th century, until its restoration and use for the Antwerp Stock Exchange from around 1879 until 1997.
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A painting of the scene inside the courtyard of the Amsterdam Stock Exchange in 1653. The Amsterdam Stock Exchange was at the center of what is now cited as the first example of an economic bubble burst, in the early to mid 1600s.
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Tulip Mania
An import from Turkey, tulips burst onto the scene in Holland around 1593 and quickly became an exotic and striking status symbol. As their prices rose and rose, people bought them because they were expensive and fragile, and everyone wanted to keep up with and emulate the tastes of the elite.
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The First Economic Bubble Burst
Tulip mania soon took over throughout Holland; demand for the flowers among the Dutch people was extremely high. As prices skyrocketed, many were pulled in by the allure and became entangled in a speculative frenzy. Some people would spend a year's salary or use credit to buy tulips in hopes of selling them for a profit later, putting them in an extremely precarious position.
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In 1637, the tulip bubble had burst, with buyers announcing they could not actually pay the extremely high price for bulbs that they'd agreed upon when speculating the demand for tulips would remain astronomical. The tulip bubble burst undermined the trust inherent in these economic relationships. In recent years, some scholars have suggested that the "tulip mania" has been exaggerated, but it remains a parable for the risks of frenzied greed on the market.
Photo: In January 1931, a young Dutch woman displays tulips.
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The New York Stock Exchange
Today, the New York Stock Exchange (NYSE) is one of the largest stock exchanges in the world. Its earliest beginning was a meeting of 24 stockbrokers under a tree in 1792, on what is now known as Wall Street in lower Manhattan, New York City. It was formally established in 1817, and took on its current name in 1863.
Image: An engraving showing the main hall of the NYSE in the 1800s.
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The Panic of 1907
Way back in 1907, investors borrowed money to attempt to finance a cornering shared of United Copper Company (UCC). The UCC burst, leading to other firms losing up to a fifth of their value. When the news broke, the public, losing their belief in banks, withdrew their money, causing an economic disaster and forcing the involvement of investors like J.P. Morgan and John D. Rockefeller.
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The Panic of 1907 (also known as the 1907 Bankers' Panic or the Knickerbocker Crisis) led to more government oversight in bailing out financial markets.
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The Wall Street Bombing of 1920
It was lunchtime on Thursday, September 16th, 1920, when a horse-drawn cart pulled up across from the J.P. Morgan building in the center of Wall Street. The driver disappeared into the crowd, and the cart exploded, killing 30 people and injuring hundreds more. To this day, no one has claimed responsibility for the attack and the mystery remains unsolved. Some have suggested the attack was the work of the “American Anarchist Fighters,” but evidence was insufficient.
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The Wall Street Crash of 1929
The Great Crash of 1929: the big one. If anything, this is the one that you've learned about in history classes, the one that is so often referenced. In September and October 1929, following a period of a thriving economy and booming production, multiple factors led to the worst economic event the world has ever seen.
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The Roaring Twenties, following World War I, was a time of wealth, excess, spending, and high-risk speculation. Many believed that the stock market would continue to rise, and thus the impact was all the more devastating when it all came crashing down. The 1929 crash signaled the beginning of the Great Depression. Many people suddenly lost their life savings and scrambled to get cash.
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Here, in October 31st, 1929, members of a finance club in London watch the New York Stock Exchange numbers fluctuate as a telephone operator connects with New York.
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A month later, in November 1929, New Yorkers flood the outside of the US Sub-Treasury Building—which is now the Federal Hall National Memorial.
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Another striking image from the Wall Street crash of 1929—where New Yorkers, fearing for their financial livelihoods, crowded outside the New York Stock Exchange.