A Brief History of the Stock Market

1619: The Dutch East India Company

The Dutch East India Company was the first company to issue stock, and it had an impact on the global economy that is still felt today. The company was originally chartered in 1602 to trade with the East Indies, particularly the Indonesian archipelago, and it holds the distinction of being the first joint-stock company in history. The Dutch East India Company is also notable because it issued what is generally considered to be the first-ever corporate bonds. The idea behind the bonds was that they would be traded on the open market, and the investors who bought the bonds would be paid out of the Dutch East India Company’s profits. All of this meant that the company was not only able to raise capital by selling stock but also that the shareholders would have a vested interest in seeing the company do well.

1790: The First Recorded Initial Public Offering (IPO)

The first IPO on record was that of the Bank of New York in 1790, which was listed on the New York Stock Exchange (NYSE). This was followed by several other IPOs that contributed to the growth of the NYSE. However, the first recorded IPO did not exist in a vacuum but was part of a wider boom in the stock market. During the first few decades of the 1800s, the stock market took off. The early 1800s were also a period when banks were finding it increasingly difficult to pay back the money they had borrowed. This meant that there was a lot of instability in the market and the banks took extreme measures to avoid going broke. The surge in the stock market meant that bankers could use their stock as collateral to take out loans and temporarily solve their liquidity issues. This ultimately contributed to the growth of the stock market as more and more people borrowed money to invest in stocks. Between 1790 and 1802, the amount of money invested in the stock market grew from around $2 million to $25 million.

1817: The Panic of 1819

The Panic of 1819 was one of the earliest stock market crashes, and it was caused by a combination of factors. The first was the fact that many banks had started lending money to individuals to invest in stocks. This helped to drive up the stock market and make shares even more valuable, but it also meant that the banks had a lot of money at risk. The second factor was a change in the political landscape. President James Madison was reelected in 1816, and he had campaigned on a promise to reduce government spending. This meant that banks would no longer be able to rely on federal assistance if they ran into trouble, which in many cases they did as a result of the high number of loans. These two factors led to a stock market crash that was felt across the country, and it would take over a decade for the market to fully recover. The Panic of 1819 was significant not only because it marked the start of a period that is often referred to as the "wild west" of the stock market, but also because it inspired the first-ever economic research paper.

1864: Wells Fargo & Company

The origins of Wells Fargo & Company can be traced back to 1864 when two men named Henry Wells and William Fargo created a stagecoach company. The duo had earned a good reputation for their work as express agents and stagecoach operators. In 1866, the company opened the first bank west of the Mississippi, and within a decade, it was growing rapidly. The company was largely responsible for connecting California to the rest of the country, but it also benefited from the economic prosperity of the time. The California Gold Rush, which started in 1848, had led to a massive influx of people moving to the state, and Wells Fargo & Company was there to transport them around. This meant that the company had plenty of opportunities to grow, and it took full advantage of the situation.

1915: The First Automated Stock Market Game

The first automated stock market game was created in 1915, and it was known as the Model T Investment Trust and Stock Market Game. The game was created by the president of the Ford Motor Company, and it was designed to illustrate the potential of automobiles and the stock market. The game was played on a board that was designed to look like the New York Stock Exchange, and it included miniature cars as well as miniature shares. The game was designed to illustrate that Ford was a worthy investment, and it also demonstrated that playing with miniature cars as a child could be pretty useful when it came to making money later in life. The game was a huge success and was played by thousands of children and adults alike. It is often referred to as the first model stock market game, and it has since been used as a learning tool in numerous classrooms around the world.

1979: Electronic Trading Goes Live

The first ever electronic trading system went live in 1979, and it was followed a year later by the first ever automated trading system. The two systems proved to be extremely popular, and they quickly became essential tools for any serious trader. With the ability to trade quickly, automatically, and with limited human intervention, these systems gave traders an advantage over their competitors that is still felt today. Among the first systems to be developed was the DAS (Direct Access System), and it transformed trading by allowing customers to trade directly with the NYSE via computers. In the decades since, trading has become even faster and more automated, and today many traders use artificial intelligence to make their trading decisions.

1996: The Dot Com Bubble Bursts

The dot com bubble burst in the late 1990s, but the causes of the bubble can be traced back to the early 1990s. During this time, internet companies were springing up like weeds, and investors were eager to throw their money into any business that had a ".com" at the end of its name. This ultimately led to a bubble that burst and left many investors financially ruined. However, while many people lost money during this period, others managed to profit. The Internet Bubble was a time during which stock prices for internet companies grew exponentially. Many companies with no profits and minimal assets saw their stock prices increase 10-1,000 times over. This led to a lot of money being made off of the bubble. Ultimately, the bubble burst, and many investors lost a large chunk of their money. This was partially due to the inflated stock prices, but also because many of these companies had almost no revenue.

2001-2009: The Shadow Banking System And Dark Pool Fraud

The shadow banking system grew out of the deregulation that was implemented following the collapse of the dot com bubble. During the early 2000s, many investment banks were caught engaging in dubious practices, including fraud and the manipulation of the stock market. The system works similarly to traditional banking systems, but without regulations. This led to a situation where banks were able to lend money while avoiding many of the regulations that they would otherwise be obligated to follow. Because of this, it was much easier for banks to lend money, which led to a rapid increase in the amount of debt in the United States. This contributed to the housing bubble, which burst in 2007, causing a significant drop in the value of many stocks.

2009 to Present Day: Dodd-Frank Reform And More Electronic Trading

Since the Great Recession, there have been significant changes to the way the stock market is regulated. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which aimed to prevent another economic downturn of this magnitude. The act aimed to achieve this by reducing the risk of future bank collapses, increasing regulation of financial institutions, and increasing oversight of the stock market. One of the major changes brought about by the act.