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From Jonathan’s Coffee House to the Current Stock Exchanges

Dutch East India Company: 13th Century
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Like so many elements of modern finance, the development of public equity markets can be traced back to the Dutch. The shares of the Dutch East India Company were exchanged in ‘trading houses’. These trading houses date back to the 13th Century and the Van der Beurze family. Does ‘Beurze’ sound familiar? Börse(german)…Borsa(italian/turkish)…Bourse(french).


   London Stock Exchange: 17th Century

The ‘Glorious Revolution’ of 1688 brought these techniques to England. Dealers used to exchange their shares at Jonathan’s Coffee House (1698). That was an ordinary place even you might have been able to spend your time. Once the trade traffic became frequent, they bough the coffee house and decided to lay out some rules in order to regulate these exchanges and to maintain their reputation. Today this place is known as the predecessor of the LSE.

New York Stock Exchange: 18th Century


A similar story can be observed in the US. The founding agreement of the NYSE is called as ‘The Buttonwood Agreement’ (1792), since they literally sat down under a buttonwood tree and agreed on: “We the Subscribers, Brokers for the Purchase and Sale of the Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at least than one quarter of one percent Commission on the Specie value and that we will give preference to each other in our Negotiations.

Why ‘organized’ markets?

The development of organized exchanges such as the LSE and NYSE offer a number of important insights into the economics of the stock exchange. The most valuable assets on an exchange market are its reputation, its rules and the trading information it generates. 
Second, exchange members possess powerful incentives to develop governance mechanisms which promote confidence. These self-regulated markets provide a platform that you can confidently trade your assets.


Image source: Flickr

Cem Veziroğlu

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