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Animals to equity: stock exchange histories of the world

By Brian Bollen

18:17, 19 June 2017

sheep market of Stans on the Swiss alps

Stock markets began before ‘stock’ meant equity in businesses – when it meant animals (sheep, cows and pigs). Stock markets date back to the agricultural revolution, when our ancestors stopped being hunter-gatherers.

The original stock exchanges

Cattle, or stock, markets continue to represent the simplest form of a stock exchange. Owners take stock to market. Buyers bid for the stock. Prices are agreed. Money changes hands. Stock is delivered. Delivery versus payment is a phrase that professional investors still use today.

A modern exchange is an institution, organisation or association that hosts a market where stocks, bonds, options and futures, and commodities, are traded.

Buyers and sellers come together to trade during specific hours on business days. Exchanges impose rules and regulations on the firms and brokers that are involved with them. If a particular company is traded on an exchange, it is referred to as ‘listed’.

Securities that are not listed on a stock exchange are sold over the counter, or OTC. Companies that have shares traded OTC are usually smaller and riskier because they do not meet the requirements to be listed on a stock exchange.

Mostly electronic

Stock markets today are mostly electronic and screen-based. They are almost unrecognisable from their former selves. In the years BC (before computers), open outcry trading was the norm. This involved shouting of bids and offers and the use of hand signals.

Stock market tradersStock market traders: Arne Dedert/DPA/PA Images

The trend away from open outcry continues. CME (Chicago Mercantile Exchange) Group announced on 12 April 2017 that it would close its London-based derivatives exchange and clearing house, CME Europe and CME Clearing Europe, by the end of this year.

This announcement came almost a year to the day that it announced the closure of its New York open outcry options floor because of a lack of volume.

In July 2015 the CME closed its own trading floor. This brought to an end a 167-year era of garishly dressed traders shouting out commodities orders.

Derivatives built on the physical

While the physical markets have closed, business has boomed, thanks to computers.

The increase in volume has been matched by an increased complexity in products and trading strategies enabled by computers. This can be bewildering for even sophisticated investors.

But it is important to bear in mind that the modern clutter of futures, options, other derivatives and stock indices build on the original physical stock market.

Amsterdam first

The first stock exchange as we know them was opened in Amsterdam in 1602.

The largest exchanges in the world today are:

  1. New York Stock Exchange (NYSE)
  2. NASDAQ (originally the National Association of Securities Dealers Automated Quotation exchange)
  3. London Stock Exchange (LSE)
  4. Tokyo Stock Exchange (TSE)
  5. Shanghai Stock Exchange
  6. Hong Kong Stock Exchange

Each has a story to tell.

London

The London Stock Exchange Group describes itself as a diversified international exchange group that sits at the heart of the world’s financial community.

The group can trace its history back to 1801, though trading took place in London's coffee houses and other venues before that.

The Main Market is London’s flagship market for larger, more established companies, and is home to some of the world’s largest and most well known companies.

A listing on the Main Market represents a badge of quality for every company listed and traded on it, and an aspiration for many companies worldwide.

London Stock Exchange signThe London Stock Exchange Group describes itself as a diversified international exchange group that sits at the heart of the world’s financial community: Tony Baggett/Shutterstock.com

AIM on target

The AIM (formerly the Alternative Investment Market) is the London Stock Exchange’s international market for smaller growing companies.

A wide range of businesses including early-stage, venture capital-backed, as well as more established companies, join AIM seeking access to growth capital.

AIM is the most successful growth market in the world. Since its launch in 1995, more than 3,600 companies from across the globe have chosen to join it.

Millennium software

The 21st century London Stock Exchange Group is also a developer of trading platforms and capital markets software.

In addition to the group’s own markets, more than 40 other organisations and exchanges around the world use the group’s MillenniumIT trading, surveillance and post-trade technology.

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New York

In the United States, a group of stockbrokers met under a buttonwood tree in New York City. On 17 May 1792, 24 of these stockbrokers gathered outside 68 Wall Street to sign the Buttonwood Agreement, which effectively created the New York Stock & Exchange Board.

In 1863, it was officially renamed the New York Stock Exchange. Known to most people as the NYSE, it is owned by Intercontinental Exchange (ICE).

According to ICE, as of April 2017 it:

  • Owns 12 exchanges
  • Lists more than 12,000 securities and contracts
  • Trades 5.2 million futures and 1.8 billion cash equities each day

NASDAQ

NASDAQ's potted history boasts that it has evolved dramatically from 1971, when it began primarily as a US-based equities exchange.

Today, it is recognised around the globe as a diversified worldwide financial technology, trading and information services provider to the capital markets.

NASDAQ claims to have transformed the world’s capital markets by engineering precedent-setting acquisitions and empowering people to think differently and businesses to compete more effectively.

Among the firsts claimed by NASDAQ are its initial invention of electronic trading and the modern IPO (initial public offering).

The it has more than 3,500 staff serving businesses and investors from more than 50 offices in 26 countries across six continents – and in every capital market.

Tokyo

The Tokyo Stock Exchange says its stock trading floor has attracted attention as a symbol of Japan's securities and financial markets for more than 120 years.

Floor trading began at the Tokyo Stock Exchange on 1 June 1878. In the 1880s, during the Meiji period of Japanese history (1868-1912), floor clerks wore kimonos.

The stock trading floor was closed on 30 April 1999 to accelerate the speed and reduce the cost of transactions by member securities companies, and seek further efficiency in the Tokyo market.

In 2013, the Tokyo Stock Exchange joined with the Osaka Securities Exchange and is now part of the Japan Exchange Group.

Tokyo Stock Exchange signIn 2013, the Tokyo Stock Exchange joined with the Osaka Securities Exchange and is now part of the Japan Exchange Group: Osugi/Shutterstock.com

Shanghai

The Shanghai Stock Exchange (SSE) was founded on 26 November 1990 and commenced operations on 19 December of that year. It is a non-profit organisation directly governed by the China Securities Regulatory Commission (CSRC).

SSE says it bases its development on the principles of legitimacy, regulation, self-discipline, and compliance to create a transparent, open, reliable and efficient marketplace.

It offers a variety of functions:

  • Providing a marketplace and facilities for securities trading
  • Formulating business rules
  • Accepting and arranging listings
  • Organising and monitoring securities trading
  • Regulating members and listed companies
  • Managing and disseminating market information

Hong Kong

Reports of securities trading in Hong Kong date back to the mid-19th century. The first formal market, the Association of Stockbrokers in Hong Kong, was not established until 1891. The association was renamed the Hong Kong Stock Exchange in 1914.

A second exchange, the Hong Kong Stockbrokers' Association, was incorporated in 1921. The two exchanges merged to form the Hong Kong Stock Exchange in 1947 and re-established the stock market after the Second World War.

Rapid growth of the Hong Kong economy led to the establishment of three other exchanges:

  • Far East Exchange, 1969
  • Kam Ngan Stock Exchange, 1971
  • Kowloon Stock Exchange, 1972

Pressure to strengthen market regulation and to unify the four exchanges led to the incorporation of the Stock Exchange of Hong Kong (SEHK) in 1980.

The four exchanges ceased business on 27 March 1986. The new exchange commenced trading through a computer-assisted system on 2 April 1986.

In his 1999 Budget speech, Hong Kong's financial secretary announced comprehensive market reform of the stock and futures markets. The reforms were designed to increase competitiveness and meet the challenges of an increasingly globalised market.

The SEHK and Hong Kong Futures Exchange (HKFE) demutualised and merged with Hong Kong Securities Clearing Company (HKSCC) under a single holding company, HKEX, in March 2000.

Related stories

Top ten stock exchanges of the world

  1. New York Stock Exchange (NYSE)
  2. NASDAQ (originally the National Association of Securities Dealers Automated Quotation exchange)
  3. London Stock Exchange (LSE)
  4. Tokyo Stock Exchange (TSE)
  5. Shanghai Stock Exchange (SSE)
  6. Hong Kong Stock Exchange (SEHK)
  7. Euronext
  8. Shenzhen Stock Exchange (SZSE)
  9. Toronto Stock Exchange (TMX)
  10. Frankfurt Stock Exchange (FWB)

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