History of the stock market

Stock markets are dynamic and complex financial institutions that play a central role in the global economy. They serve as a platform for buying and selling shares of companies, allowing investors to participate in the growth of public companies. In this timeline, we explore the history of the stock market, identifying when and how key markets were founded along with other significant events.

What is a stock market?

A stock market is an exchange where entities can buy and sell shares of publicly-traded companies. While physical locations like Wall Street in New York or the Royal Exchange in London have become synonymous with the stock market, most traders buy and sell stocks online. In fact, some exchanges have closed their physical floors to opt wholly for electronic trading, making the markets accessible to everyone.

Early origins of the stock market

Stock-like instruments can be traced back to Ancient Rome, where citizens bought shares in public companies involved in multiple industries, such as construction and shipbuilding.

The concept of stocks further developed in medieval Europe with the emergence of joint-stock companies, enabling individuals to invest in expeditions and trade ventures. Merchants and traders devised multiple vehicles for investment including the sale of shares and partnerships.

The first stock exchange: 1602

The first official stock exchange was the Amsterdam Stock Exchange established in 1602. At first, only shares for the Dutch East India Company could be traded, making it the world’s first public company. Eventually, more companies were added and the exchange introduced important features like listing fees and regular trading hours. This would all lay the groundwork for future stock markets.

New York Stock Exchange formed: 1792

The first iteration of the New York Stock Exchange was founded in 1792 with the signing of the Buttonwood Tree Agreement. This document organized securities trading among 24 different brokers on Wall Street. The daily meeting to buy and sell securities would eventually grow into the New York Stock Exchange (NYSE), now the largest stock exchange in the world.

London Stock Exchange formed: 1801

When the Royal Exchange was first opened in 1571 to facilitate the exchange of commerce and valuable goods, stockbrokers were not allowed inside the building. Instead, these men facilitated securities trades at the nearby Jonathon’s Coffee House because of their rowdy and unruly nature. Stockbrokers were not allowed to conduct business in the Royal Exchange until it was rebuilt in 1669 after being destroyed by the Great Fire of London. In 1773, a more formal exchange was created in Sweeting’s Alley. This became the official location of the London Stock Exchange by 1801.

Hong Kong Stock Exchange formed: 1891

The Hong Kong Stock Exchange was first formed as the Association of Stockbrokers in Hong Kong. It would not become known as the Hong Kong Stock Exchange until 1914. Since then, it's become one of the largest in the world as the city has also grown in prominence as a popular shipping port and business centre.

Wall Street Crash of 1929

While numerous market panics occurred in the first century of major markets’ existence, the crash of 1929 was the largest to date and is generally regarded as the first full market crash.

A stock market crash is a sudden and unexpected collapse in prices that affects not just a few companies or sectors, but the entire economic market. The crash of 1929 came after a decade of high economic prosperity, which drove prices to unsustainable levels. It was one of the main causes of the Great Depression that lasted until 1941.

NASDAQ formed: 1971

Headquartered in New York City, the NASDAQ is the most active exchange in the United States and the second largest in the world by market capitalisation. It was also the first electronic exchange.

The introduction of electronic trading on the NASDAQ significantly reduced bid-ask spreads, instantly making it a competitor against large exchanges like the NYSE and encouraging other exchanges to go electronic too.

Black Monday: 1987

Black Monday was another severe market crash that saw major US stock markets lose up to 20% of their value. Many economists regard Black Monday as a price correction following a highly inflated market, similar to the crash of 1929 proceeding the roaring twenties.

Other factors, such as a triple witching the Friday before and mass panic leading to a bank run, caused what could have just been a price correction to spiral out of control.

Shanghai Stock Exchange formed: 1990

Stock trading took place in mainland China as early as the 1860s, and several forms of stock exchanges were founded in the following decades. However, all securities exchanges were closed in 1949 after the People's Republic of China came into power. Stocks and bonds weren’t traded again until the 1980s, and what is the current Shanghai Stock Exchange opened in December of 1990.

Euronext stock exchange formed: 2000

Euronext was formed as a merger of the Amsterdam Stock Exchange, Brussels Stock Exchange and Paris Bourse. It was established to take advantage of the shared European currency. It is now the fourth-largest stock exchange by market capitalisation behind the NYSE, NASDAQ and China's Shanghai Exchange.

Euronext operates in multiple European Union member countries, making it a significantly complex and highly-traded exchange.

Dot-com bubble: 1999 - 2000

The dot-com bubble occurred after a sharp rise in new technology investments failed to create the level of profit expected of the new companies. The focus of internet-based businesses in the crash is where the name comes from.

Financial crisis: 2008

The financial crisis was another major stock market crash following a remarkable bull market that encouraged speculative investors to develop subprime mortgages – high-risk loans offered to prospective homeowners that resulted in mass defaults by the borrowers. The real estate market had overextended these loans and subsequently collapsed when borrowers were unable to pay them back.

Coronavirus crash: 2020

The rapid spread of the coronavirus effectively shut down industries and majorly disrupted global trade. Selloffs became so severe that several markets shortly suspended trading after falling more than 10% in a single day.  

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Additional stock market FAQs

Where were stocks first created?

While stock-like instruments emerged in ancient Rome and medieval Europe, the world's first official stock exchange was established in Amsterdam, Netherlands with a single listed company: the Dutch East India Company. The Amsterdam Stock Exchange played a crucial role in the development of modern stock markets and introduced key features that shaped the stock markets we know today.

What are stock market cycles?

Stock market cycles are patterns of movement attributed to financial markets. Market cycles generally occur in four steps: accumulation, uptrend, distribution and downtrend.

• Accumulation: Accumulation describes when traders and investors take advantage of low prices to buy more shares than they are selling. While accumulation phases take place after downtrends as investors take advantage of low prices, they can also be prompted by external economic events that encourage buying
• Uptrend: The uptrend, also known as a markup, is the stable period following the accumulation phase when prices rise steadily. When a stock market is in an uptrend, it is known as a bull market
• Distribution: A distribution phase describes the turning point when sell orders begin to outpace buyers as the stocks become overvalued
• Downtrend: In a downtrend, prices fall in what is known as a bear market. Downtrends occur naturally after a distribution phase triggered by high stock prices, but they can also be triggered by economic events that cause stock prices to plummet even in the middle of an accumulation or uptrend phase

What are stock market indices?

Stock market indices are portfolios of specific stocks used to track their performance independently from the wider stock market. Many indices are followed as representations of larger stock markets. The UK 100 and UK 250 are indices comprised of the 100 largest and 250-next largest companies on the London Stock Exchange.

Some indices are specific to certain sectors of industry like the US Tech 100, also known as the NASDAQ 100, which measures the performance of the 100 largest tech companies listed in the US.