How Were the Financial Markets Created?

Although modern-day trading and investing is mainly computerized, many people still associate the markets with the open outcry system and the traditional hustle and bustle of the New York Stock Exchange. Those days may seem like a distant past now, primitive in some ways, but even those more traditional approaches were an evolution from what the markets had started off as. So, what was the first stock exchange? How was it formed, and what was being traded? In this video, we're going to explore some of the history that has formed and shaped the very markets that we know and love today. Join us as we take a whistle-stop tour of the very first stock exchanges. Before any real stock exchange was built, some countries had their own kind of trading systems that worked in a similar way to an exchange. In the 1100s, France had the cier des, which was a group of men that managed agricultural debts on behalf of banks. They're believed to be the very first brokers since they traded these debts and regulated them all the way back 900 years ago. Most people think of Venice as the city of love, with its network of canals and astonishing cultural treasures, an ideal place for a romantic weekend getaway. You may even think about the famous Shakespeare play The Merchant of Venice, written in the 16th century. You maybe wouldn't associate it with the financial markets, but in fact, some two or three hundred years before Shakespeare's masterpiece, merchants in Venice were trading government securities all the way back in the 1300s. They would act as a sort of broker and would meet clients to provide them with all the information, which would be written on a slate. This paved the way for merchants in nearby cities to start doing the same. Fast forward another 200 or so years, and still 70 years before Shakespeare's Merchant of Venice, to put the timeline into perspective, and we have the first stock exchange. This was documented to have been created in Anor, Belgium, at around 1531. Before this, it was believed that inke keepers controlled the securities and trades, and it was a very respected job. One of these inke keepers was the Van de Bur family, who ran the Turb Bur Inn in Brugge. Men would meet up to deal with government issues, businesses, and debt and would meet in the Turb Inn or in the square around it. The group was called the Brugge Bur. This is believed to be the start of when they began calling stock exchanges bourses, named after the family. There were different houses for different countries, and they would go to each house to trade commodities. There was no actual stock in these stock exchanges. Instead, they dealt in promissory notes and bonds, similar to how we trade in the markets today. Moving on to the 1600s, lots of ship owners from different countries sent ships over to the East to trade or take valuable goods and bring them back to their home countries to trade. These were very dangerous trips for many reasons, including the turbulent waters and pirates. This meant it was a risk to the ship owners, as they would stand to lose a huge amount of money if their ship didn't make it back. So, to help decrease the risk of losing money, the ship owners would seek investors to financially back the boat and crew for that voyage. By doing this, the ship owner was distributing some of the risk and would therefore not lose as much if the ship fell victim to one of the many dangers during the trip. If the voyage was successful, the investor would get a percentage from the proceeds. Of course, this was a risky investment for the investors. If the ship didn't return, they would lose all the money they had invested. So, to reduce their own risk, they would invest in many different ships on many different voyages. A classic case of diversification, not putting all your eggs in one basket. In some cases, this would mean that even if just one ship came back, they would still make a return. They were taking a portfolio approach. A company was formed called the Dutch East India Company. The Dutch East India Company became the world's first publicly traded company in 1602. Instead of investing in each individual ship on different voyages, investors could buy shares in the company, meaning they were getting a stake in a whole load of ships instead. This meant the company could charge more for their shares and therefore had more money for even more ships and even more voyages. The investors could also potentially earn more through dividends in the company rather than just receiving a percentage from each individual trip. Investors would receive their stocks on paper, and because of this, it meant they could either hang on to them and keep getting dividends or they could be sold on to other investors for more money, potentially making them a profit on the asset. Many other countries began to do this with East Indian companies, including the Brits, who had the British East India Company in England. Investors used to go to coffee shops to buy and sell these paper stocks. Since there was no physical stock exchange set up, people would have to track down the broker that they needed and try to make a deal. If you've ever had the problem of getting hold of your broker when you needed to speak to them the most, imagine having to track them down in person. Investors in the British East India Company started earning large dividends, which then allowed them to sell their shares onto other investors for a bigger profit. There were no regulations in place for the issuing or selling of shares at this time, so more companies started to pop up and follow their footsteps. This is when the South Seas Company was born. They managed to sell all their shares before even making their first trip. People could see the huge amount of money that they had made from this and the luxury lifestyle they could afford as a result of that. And so, lo and behold, more companies started appearing, as everyone wants to jump on the bandwagon. If this sounds similar to things like the dot-com bubble or the recent wave of ICOs, that's because it is. As the famous phrase says, there's nothing new under the sun. As more companies were established, a lot of these were blind shares, as people didn't even really know what they were buying but decided to buy them anyway. In the end, the South Seas Company didn't make much profit, and dividends weren't paid out. This caused the bubble to burst, and a crash took place in England. This led to the issuing of shares being banned by the government, and that ban remained until 1825. Once again, sounds similar to the ICO wave. So, that's a brief history of the first stock exchanges. The part I found most surprising and most interesting is how Venice was a hub of government securities all the way back in the 1300s. I'd like to know which part you found most interesting. Leave a comment below and let me know. And if you like this video, hit the thumbs-up button to let us know so we can make more of them for you. And if you want to see a longer history of the stock exchanges, leave a comment below and don't forget to subscribe so you don't miss anything. Thanks for watching, and see you in the next one.

some ways but even those more traditional approaches were an evolution from what the markets had started off as so what was the first stock exchange how was it formed and what was being traded in this video we're going to explore

some of the history that has formed and shaped the very markets that we know and love today join us as we take a Whistle Stop tour of the very first stock exchanges before any real Stock Exchange was built some countries had their own

kind of trading systems that worked in a similar way to an exchange in the 1100s France had the cier Des which was a group of men that managed agricultural debts on behalf of banks they're believed to be the very first Brokers

since they traded these debts and regulated them all the way back 900 years ago most people think of Venice as the city of love with its network of canals and astonishing cultural Treasures an ideal place for a romantic weekend

getaway you may even think about the famous Shakespeare play The Merchant of Venice written in the 16th century you maybe wouldn't associate it with the financial markets but in fact some two or 3 hundred years before Shakespeare's Masterpiece merchants in Venice were

trading government securities all the way back in the 1300s they would act as a sort of broker and would meet clients to provide them with all the information which would be written on a slate this paved the way

for merchants in nearby cities to start doing the same fast forward another 200 or so years and still 70 years before Shakespeare's Merchant of Venice to put the timeline into perspective and we have the first stock exchange this was documented to have

been created in Anor Belgium at around 1531 before this it was believed that inke Keepers controlled the Securities and trades and it was a very respected job one of these inke Keepers was the Van de bur family who ran the turb bur

Inn in Brugge men would meet up to deal with government issues businesses and debt and would meet in the turb Inn or in the square around it the group was called the Brugge bur this is believed to be the start of when they began

calling stock exchanges bossers named after the family there were different houses for different countries and they would go to each house to trade Commodities there was no actual stock in these stock exchanges instead they dealt in promiser notes and bonds similar to

how we trade in the markets today moving on to the 1600s lots of ship owners from different countries sent ships over to the east to trade or take valuable goods and bring them back to their home countries to trade these were very

dangerous trips for many reasons including the turbulent Waters and Pirates this meant it was a risk to the ship owners as they would stand to lose a huge amount of money if their ship didn't make it back so to help decrease the risk of

losing money the ship owners would seek investors to financially back the boat and crew for that voyage by doing this the ship owner was distributing some of the risk and would therefore not lose as much if the ship fell victim to one of

the many dangers during the trip if the voyage was successful the investor would get a percentage from the proceeds of course this was a risky investment for the investor s if the ship didn't return they would lose all the money they had

invested so to reduce their own risk they would invest in many different ships on many different voyages a classic case of diversification not putting all your eggs in one basket in some cases this would mean that even if

just one ship came back they would still make a return they were taking a portfolio approach a company was formed called The Dutch East India Company company the Dutch East India Company became the world's first publicly traded company in 1602 instead of investing in

each individual ship on different voyages investors could buy shares in the company meaning they were getting a stake in a whole load of ships instead this meant the company could charge more for their shares and therefore had more

money for even more ships and even more voyagers the investors could also potentially earn more through dividends in the company rather than just receiving a percentage from each individual trip investors would receive their stocks on paper and because of

this it meant they could either hang on to them and keep getting dividends or they could be sold on to other investors for more money potentially making them a profit on the asset many other countries began to do this with East Indian

companies including the Brits who had the British East Indian company in England investors used to go to coffee shops to buy and sell these paper stocks since there was no physical Stock Exchange set up people would have to

track down the broker that they needed and try to make a deal if you've ever had the problem of getting hold of your broker when you needed to speak to them the most imagine having to track them down in person investors in the British

East Indian company started earning large dividends which then allowed them to sell their shares onto other investors for a bigger profit there were no regulations in place for the issuing or selling of shares at this time so more companies started to pop up and

following their footsteps this is when the South Seas company was born they managed to sell all their shares before even making their first trip people could see the huge amount of money that they had made from this and the luxury

lifestyle they could afford as a result of that and so lo and behold more companies started appearing as everyone wants to jump on the bandwagon if this sounds similar to things like the dotom bubble or the recent wave of iOS that's

because it is as the famous phrase says there's nothing new Under the Sun as more companies were established a lot of these were blind shares as people didn't even really know what they were buying but decided to buy them anyway in the

end the South C's company didn't make much profit and dividends weren't paid out this caused the bubble to burst and a crash took place in England this led to the issuing of shares being banned by the government and that ban remained

until 1825 once again sounds similar to the Ico wave so that's a brief history of the first stock exchanges the part I found most surprising and most interesting is how Venice was a hub of government securities all the way back in the 1300s

I'd like to know which part you found most interesting leave a comment below and let let me know and if you like this video hit the thumbs up button to let us know so we can make more of them for you

and if you want to see a longer history of the stock exchanges leave a comment below and don't forget to subscribe so you don't miss anything thanks for watching and see you in the next one