Stock exchanges allow individuals and business's a place to trade marketable securities with one another. Companies or governments issue or redeem securities on stock exchanges. To understand the need for stock exchanges we must first go back in time, very far back in time, to see the first example of a stock exchange. One of the first recorded exchanges was founded in the 12th century. It allowed banks to manage and deal with the debts of communities that were economically based in agriculture. This trading idea quickly spread all over Europe.
One of the next places to have changes was in Venice with bankers during the 13th century who were trading government securities. Other communities such as Pisa, Verona, Genoa and Florence also began trading securities. During this same time period, we see Bruges, in Belgium, exploding onto the map. While many speculate the Bruges was the first exchange in the world, one thing no one doubts is how it quickly became the power house in the area. The initial start of the Bruges came as commodity traders gathered inside the house of an individual named Van der Burse. The Bruges ideas spread to places like Ghent and Amsterdam as well.
The first joint stock company to ever be started was done so by the Dutch. Joint stock companies were a novel idea at that time. They allowed shareholders to invest in a business venture. The difference was that the owners would have paid a share of the profits or be liable for their share of the losses the venture produced. This was the first time in history that business ventures could have taken on without putting any one single investor at too large a financial risk, while including a very profitable opportunity as well.
The first company ever formed as a joint stock company was the Dutch East India Company, in 1602. The Dutch East India Company issued its first shares, which happened to be the first ever IPO (Initial Public Offering) in the world. It issued stock and even sold bonds to investors. The sale of their shares took place on the Amsterdam Stock Exchange.
Many decades later, in 1688 to be exact, the London Stock Exchange was born. Trade in the London Stock Exchange began with the need to finance two voyages: The Muscovy Company's attempt to reach China via the White Sea, north of Russia, and the East India Company's voyage to India. Unable to finance these expensive journeys privately, the companies raised the money by selling shares to merchants, giving them a right to a portion of any profits ever made. The idea soon caught on. It is estimated that by 1695 there were 140 joint-stock companies. The stock trading was centered around the City's Change Alley, in two coffee shops: Garraway's and Jonathan's.
Stock Exchanges were also developing in Germany. The origins of the Frankfurt Stock Exchange go back to the 9th century with Emperor Louis the German issuing a letter to hold free …