Individuals researching the history of the stock market often focus on the events leading up to the stock market crash of 1929. Admittedly, this event had a huge impact on the market as well as the world's economy. But the real history of the stock market goes back to the formation of the modern stock exchanges.
Below we've outlined what we think is a fairly accurate account of the timeline for perhaps the most important of all of the modern stock exchanges. Admittedly, the early history of these exchanges is not well documented because their origins often date back to an informal gathering of local businessmen.
The London Stock Exchange is arguably the oldest of the world's major stock exchanges. The London Exchange can trace its history back to 1698, when its founder - John Castaing - began to organize the market in Jonathan's Coffee-house using a simple list of stock and commodity prices. Today, this exchange lists 2,467 companies representing over 70 countries (October 2014).
The New York Stock Exchange or NYSE is arguably the oldest, and most well known, of all the American stock markets. The NYSE was formed in 1792 when two dozen stockbrokers from New York City had the idea to organize what was then a disorganized and chaotic method of stock trading. From those humble beginnings, the NYSE continues to grow, and today lists 2,429 companies with a total capitalization of nearly $18.8trillion (October 2014). In 2007, a merger of equals created the NYSE Euronext.
The American Stock Exchange, or Amex, is a relatively recent addition to the world's stock markets. The history of this market begins with the Curb Exchange and the California Gold Rush of 1849. The Amex played an important part in the financial and business transactions associated with the mining industry in the 19th century.
In 1921, the Amex expanded its niche role to include companies that did not meet the strict standards of the NYSE. In 1998, the NASDAQ purchased Amex and it continued its history of being a niche market player, specializing in derivatives and stock options. In late 2003, the American Stock Exchange regained its independence. After only six years under the control of NASD, The Amex Membership Corporation completed an agreement to transfer control of the exchange back to its membership.
In January 2008, NYSE Euronext announced it was acquiring the American Stock Exchange for $260 million in stock. The deal was completed on October 1, 2008, and the exchange was re-branded as the NYSE Amex Equities., then NYSE MKT.
The Bombay Exchange, also known as Mumbai, claims to be the oldest stock exchange in Asia, tracing its history back to 1875. In 2014, nearly 33 million shares of stock worth $10.4 billion (USD) were traded monthly on the BSE.
At one time, most companies aspired to be traded on the NYSE. That changed about 15 years ago, and many large companies now trade on the NASDAQ. Founded in 1971, the National Association of Securities Dealers Automated Quotation, or NASDAQ, was the first exchange to recognize the role of electronics in stock trading.
Today, the networks of computers running the NASDAQ allow it to be the most efficient stock exchange in the world. In October 2004, the NASDAQ surpassed the average trading volume of the NYSE for the first time.
The Dow Jones Industrial Average is perhaps the most prestigious of all the modern day stock indexes. With a history dating back to May 26, 1896, one of the most interesting aspects of the Dow, which is also very indicative of stock prices, is the time it took to reach each of the 1,000 point milestones. For example, when the index was first introduced it stood at 40.94 and it took roughly 76 years to reach the 1,000 mark.
The complete milestone history of the average appears in the table below:
|1,000||November 14, 1972||76 Years|
|2,000||January 8, 1987||14 Years|
|3,000||April 17, 1991||4 Years|
|4,000||February 23, 1985||4 Years|
|5,000||November 21, 1995||9 Months|
|6,000||October 14, 1996||11 Months|
|7,000||February 13, 1997||4 Months|
|8,000||July 16, 1997||5 Months|
|9,000||April 6, 1998||9 Months|
|10,000||March 29, 1999||12 Months|
|11,000||May 3, 1999||1 Month|
|12,000||October 19, 2006||7 Years 5 Months|
|13,000||April 25, 2007||6 Months|
|14,000||July 17,2007||3 Months|
|15,000||May 7, 2013||5 Years, 10 Months|
|16,000||November 18, 2013||6 Months|
|17,000||July 3, 2014||8 Months|
All publically traded stocks in the United States are regulated by the Securities and Exchange Commission, or SEC, whose origins dates back to the Great Crash of 1929, and the reforms that followed. Before that time, there was little need or support for regulation of the securities markets.
During the crash, not only did individual investors lose countless fortunes, the banking system collapsed too. Banks were invested heavily in the market, and the ensuing panic after the crash caused many people to pull money from their savings accounts, forcing countless banks to close.
In an attempt to restore faith in capital markets, Congress passed the Securities Act of 1933 and the Securities and Exchange Act of 1934. In that same year, the Securities and Exchange Commission was established to enforce the securities laws passed by Congress.
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