It’s difficult to think about the stock market without mentioning New York Stock Exchange (NYSE). Because significant stocks were included on either the NYSE or Nasdaq’s stock exchange lists. How did the most popular stock exchange, the NYSE, come into being?
Finance Brokerage says that the U.S. stock market has thrived without trading since its inception. It started trading in Venice and moved on to India, India, and New York.
Please pardon sir, sugar?
Merchants traded goods in Venice. Antwerp businessmen wanted proof that they owned the same company as other businesses. The British East India shares were also issued in paper. While a stock exchange wasn’t yet in existence, investors were allowed to sell the documents. It was difficult to find a broker (a third party) to execute the trade. Most traders and investors in England would do business in coffee shops. All information, from shares for sale to debts, was written down and posted at the shop’s doors. It would also be sent as mail.
This type of trade, although it was quite simple, marked the beginning of what would become a stock market. This is a short overview of the topic. It will help you understand where it all began. This will allow you to understand why the US stock market is what it is today.
Monopoly Government
At the time, the British East India Company faced a serious problem. It was a government-backed Monopoly. Investors began to sell their shares in exchange for other riches. Naturally, others wanted to get a piece.
Because the financial boom in England was sudden, there was no need to create rules and regulations for issuing shares. With a similar approach to the king, the South Seas Company (SSC), also emerged with its shares and re-issues.
The SSC’s modest profits failed to pay dividends, and the optimism began to fade. This emphasized the differences between new share issue and British East India Company. The government banned the issuing shares from 1892 onwards because of the crash.
The New York Stock Exchange:
We must start in London, the place where the first stock market was established (LSE) in 1773. London had its problems with regulating their business due to restrictive laws. However, the U.S. was able to dominate this area. Despite the fact that the Philadelphia Stock Exchange was the place where the first U.S. stock came to be, it didn’t last. 19 years after the LSE was formed, the NYSE quickly became a major stock exchange market.
Wall Street was the place where the New York Stock Exchange was established thanks to ambitious and determined brokers. Wall Street was crucial in helping NYSE to gain market dominance. Nearly all major business transactions were conducted from the United States, for nearly all banks and corporations. The NYSE was able to set requirements and fees which made it a rich institution.
For almost 200 years, the New York Stock Exchange worked without any major competitors. American stocks were the most important and the American economy was flourishing. Although the NYSE experienced ups and downs just like any other business it was still a successful one. The Great Depression and the 1920 Wall Street bombing caused immense damage. Many believe that it was an anarchist act. The NYSE then introduced stricter reporting requirements as well as listing.
Strong performance by NYSE Competitors
London was the first European exchange. However, many companies wanted to list in New York. France, Switzerland and Hong Kong were some of the countries that developed their stock markets. They found that the NYSE and U.S. stocks provided stable ground until they could move to the LSE and then to the NYSE again when they became stronger. Because of weak government regulation and few listing rules, these international exchanges could be dangerous.
The NYSE was the largest stock exchange in the country and internationally. This stock exchange remains the most important in the entire world. The world economy is dependent on it.
The NYSE is not the only market that is experiencing difficulties.
- However, in 1971, a challenge arose.
- Nasdaq, it’s nice to meet you
The formation of the Nasdaq was possible thanks to FINRA, or the National Association of Securities Dealers. It was a significant breakthrough because trades could be executed electronically and it was already a network.
It was a game changer in the industry for traders and a more efficient method of doing business. The NYSE was forced to rethink its work by the competition from Nasdaq. They did this by merging with Euronext. This was the first transatlantic exchange and it continued until Euronext’s independence in 2014.
The future is bright
There are more companies on the Nasdaq’s list. FinanceBrokerage says that the NYSE remains the main home of most American companies. It is also the largest and most powerful stock exchange. They are stronger than Nasdaq or other larger markets.
With that advantage, the NYSE is expected to be the market leader in the future. This doesn’t mean it won’t face the same challenges as in the 1970s. While it is at the top of the stock exchanges, smaller ones will continue to appear and may even be their competition.
