THE BEGINNING, ORIGIN AND DEVELOPMENT OF THE STOCK EXCHANGE
The development of stock exchanges and trading on them is a consequence of the development of a specific market. The stock exchange emerged spontaneously, from the market itself, ie from its needs. For this reason, the emergence, expansion and development of stock exchanges and operations on them coincides with the expansion and conquest of new markets, both spatially and technologically.
The roots of the first trade from which the stock exchange got its name are connected to Flanders, the city of Bruges and the 16th century. However, today’s major stock markets emerged somewhat later. The beginnings of the New York Stock Exchange date back to 1792, when 24 brokers gathered and signed the Batonwood Agreement, which is the founding act of the world’s largest stock exchange. A few years later, more precisely in 1801, another large stock exchange was founded – the London Stock Exchange. In addition to this formation of stock exchanges in the institutional sense, the flows of creating trading items ran in parallel. Thus, the first issues of “shares” were created in the middle of the 16th century, when funds were collected for trade expeditions. Instead of taking loans, companies issued certificates (forerunners of shares) and thus collected money for expensive trips. Thus, the buyers of “certificates” became the owners of the goods that should be the subject of trade, and with it all the risks and benefits that travel and trade bring. The owners of the “shares” are left to hope for a good business result and thus a personal gain.
The reasons for the emergence of the stock exchange institution can best be seen if the development of the elements of stock exchange business is followed. One of the basic ones is to raise smaller amounts of capital that were in several hands, in order to concentrate those funds in order to finance expensive projects. Another important element is bridging the time period from investing to profiting, which is often referred to in the literature as the capitalization of expectations. That is, the possibility of selling Howe before it reaches realization.
Forward transactions are also recorded on clay tiles, ie the obligation of one party to settle its debt with certain goods in some future period. At the moment when the creditor – the holder of the document on the future delivery of goods, resold that document in order to make money on the difference in price, we got the first deal that could be called stock market speculation.
Like the elements of stock exchange business, the rules of conduct in trade, as a crucial condition of the stock exchange, did not have to wait for Flemish traders to be invented. In the form of customary law, trade has existed since time immemorial, but the first written evidence appeared in ancient Rome. The established practice of meeting in one place allowed the formation of the first rules of trade, but also the first standards of goods. The rules that arose from the usual trade law, based on the rules that were adhered to by ancient traders, and above all the Roman ones, bring into organized trading two principles, which are still inseparable from the development of the stock exchange institution – trust and security. These two principles become necessary conditions for the stock exchange way of trading, something without which it is unthinkable.
While all the elements of stock exchange business have come together and formed a stock exchange that we know, a lot of time has passed, and the story of the stock exchange, as a way of organizing and bringing order and rules to trading, is much older.
With the advent of the industrial revolution, the stock market gained its current contours: building, business rules, governing bodies, arbitration, etc. The state (1929-1933) interfered in what was until then an autonomous stock exchange law, trying to increase the security of business without endangering the sensitive stock exchange mechanism. In the seventies of the XX century, there was a strong development of financial derivatives exchanges (futures and options). With the sudden computerization of stock exchange operations, “place” as an integral part of the definition of the stock exchange is losing importance. It can now be traded from anywhere electronically almost continuously over time. Despite these changes, the stock exchange has retained its core functions.