Euronext Amsterdam building at Beursplein 5Entrance of the stock exchange building and bullA bond from the Dutch East India Company, dating from 7November 1623, for the amount of 2,400 florins
The Amsterdam stock exchange is considered the oldest "modern" securities market in the world.[2] It was created shortly after the establishment of the Dutch East India Company (VOC) in 1602[3] when equities began trading on a regular basis as a secondary market to trade its shares. Prior to that, the market existed primarily for the exchange of commodities.[4] It was subsequently renamed the Amsterdam Bourse and was the first to formally begin trading in securities. The Sephardic Jewish writer Joseph de la Vega's Confusion of Confusions (1688) is the first full-length work about the stock exchange, its participants and shareholders.[5]
In 1602, the States General of the Netherlands granted the VOC a 21-year charter over all Dutch trade in Asia and quasi-governmental powers. The monopolistic terms of the charter effectively granted the VOC complete authority over trade defenses, war armaments, and political endeavors in Asia. The high level of risk associated with trade in Asia gave the VOC its private ownership structure. Following in the footsteps of the English East India Company, stock in the corporation was sold to a large pool of interested investors, who in turn received a guarantee of some future share of profits.[6] In the Amsterdam East India House alone, 1,143 investors subscribed for over ƒ3,679,915 or €100 million in today's money.[7]
Although it is usually considered to be the first stock market, Fernand Braudel argues that this is not precisely true:
"It is not quite accurate to call [Amsterdam] the first stock market, as people often do. State loan stocks had been negotiable at a very early date in Venice, in Florence before 1328, and in Genoa, where there was an active market in the luoghi and paghe of Casa di San Giorgio, not to mention the Kuxen shares in the German mines which were quoted as early as the fifteenth century at the Leipzig fairs, the Spanish juros, the French rentes sur l'Hotel de Ville (municipal stocks) (1522) or the stock market in the Hanseatic towns from the fifteenth century. The statutes of Verona in 1318 confirm the existence of the settlement or forward market ... In 1428, the jurist Bartolomeo de Bosco protested against the sale of forward loca in Genoa. All evidence points to the Mediterranean as the cradle of the stock market. But what was new in Amsterdam was the volume, the fluidity of the market and publicity it received, and the speculative freedom of transactions."
However, it is the first incarnation of what we could today recognize as a stock market.
The subscription terms of each stock purchase offered shareholders the option to transfer their shares to a third party. Quickly a secondary market arose in the East India House for resale of this stock through the official bookkeeper. After an agreement had been reached between the two parties, the shares were then transferred from seller to buyer in the "capital book".[7] The official account, held by the East India House, encouraged investors to trade and gave rise to market confidence that the shares weren't just being transferred on paper.[7] Thus, speculative trading immediately ensued and the Amsterdam securities market was born.
A big acceleration in the turnover rate came in 1623, after the 21-year liquidation period for the VOC ended. The terms of the initial charter called for a full liquidation after 21 years to distribute profits to shareholders. However, at this time neither the VOC nor its shareholders saw a slowing down of Asian trade, so the States General of the Netherlands granted the corporation a second charter in the West Indies.
This new charter gave the VOC additional years to stay in business but, in contrast to the first charter, outlined no plans for immediate liquidation, meaning that the money invested remained invested, and dividends were paid to investors to incentivize shareholding. Investors took to the secondary market of the newly constructed Amsterdam Stock Exchange to sell their shares to third parties.[8] These "fixed" capital stock transactions amassed huge turnover rates, and made the stock exchange vastly more important. Thus the modern securities market arose out of this system of stock exchange.
The voyage to the precious resources in the West Indies was risky. Threats of pirates, disease, misfortune, shipwreck, and various macroeconomic factors heightened the risk factor and thus made the trip wildly expensive. So, the stock issuance made possible the spreading of risk and dividends across a pool of investors. Should something go wrong on the voyage, risk was mitigated and dispersed throughout the pool and investors all suffered just a fraction of the total expense of the voyage.
The system of privatizing national expeditions was not new to Europe, but the fixed stock structure of the East India Company made it one of a kind. In the decade preceding the formation of the VOC, adventurous Dutch merchants had used a similar method of "private partnership" to finance expensive voyages to the East Indies for their personal gain.[9] The ambitious merchants pooled money together to create shipping partnerships for exploration of the East Indies. They assumed a joint-share of the necessary preparations (i.e. shipbuilding, stocking, navigation) in return for a joint-share of the profits.[9] These Voorcompagnieën took on extreme risk to reap some of the rewarding spice trade in the East Indies, but introduced a common form of the joint-stock venture into Dutch shipping.
Although some of these voyages predictably failed, the ones that were successful brought promise of wealth and an emerging new trade. Shortly after these expeditions began, in 1602, the many independent Voorcompagnieën merged to form the Dutch East India Trading Company.[9] Shares were allocated appropriately by the Amsterdam Stock Exchange and the joint-stock merchants became the directors of the new VOC.[9] Furthermore, this new mega-corporation was immediately recognized by the Dutch provinces to be equally important in governmental procedures. The VOC was granted significant war-time powers, the right to build forts, the right to maintain a standing army, and permission to conduct negotiations with Asian countries.[6] The charter created a Dutch colonial province in Indonesia, with a monopoly on Euro-Asian trade.
The city hall of Batavia, during the Dutch East Indies period
The subscription terms of each stock purchase offered shareholders the option to transfer their shares to a third party. Quickly a secondary market arose in the East India House for resale of this stock through the official bookkeeper. After an agreement had been reached between the two parties, the shares were then transferred from seller to buyer in the "capital book".[7] The official account, held by the East India House, encouraged investors to trade and gave rise to market confidence that the shares weren't just being transferred on paper.[7] Thus, speculative trading immediately ensued and the Amsterdam securities market was born.
Courtyard of the Amsterdam Stock Exchange, circa 1670
The rapid development of the Amsterdam Stock exchange in the mid 17th century led to the formation of trading clubs around the city. Traders met frequently, often in a local coffee shop or inns to discuss financial transactions. Thus, "Sub-markets" emerged, in which traders had access to peer knowledge and a community of reputable traders.
These were particularly important during trading in the late 17th century, where short-term speculative trading dominated. The trading clubs allowed investors to attain valuable information from reputable traders about the future of the securities trade.[10] Experienced traders on the inside circle of these trading clubs had a slight advantage over everyone else, and the prevalence of these clubs played a major role in the continued growth of the stock exchange itself.
Additionally, similarities can be drawn between modern day brokers and the experienced traders of the trading clubs. The network of traders allowed for organized movement of knowledge and quick execution of transactions. Thus, the secondary market for VOC shares became extremely efficient, and trading clubs played no small part. Brokers took a small fee in exchange for a guarantee that the paperwork would be appropriately filed and a "buyer" or "seller" would be found. Throughout the 17th century, investors increasingly sought experienced brokers to seek information about a potential counterparty.[11]
The European Options Exchange (EOE) was founded in 1978 in Amsterdam as a futures and options exchange. In 1983, it started a stock market index, called the EOE index, consisting of the 25 largest companies that trade on the stock exchange. Forward contracts, options, and other sophisticated instruments were traded on the Amsterdam Stock Exchange well before this.[4]
In 1997, the Amsterdam Stock Exchange and the EOE merged, and its blue chip index was renamed AEX, for "Amsterdam EXchange". It is now managed by Euronext Amsterdam. On 3 October 2011, Princess Máxima opened the new trading floor of the Amsterdam Stock Exchange.[12]
Engraving depicting the Amsterdam Stock Exchange, built by Hendrik de Keyser 1608-11 on The Rokin
The Amsterdam Bourse, an open-air venue, was created as a commodity exchange in 1530 and rebuilt in 1608.[16] Rather than being a bazaar where goods were traded intermittently, exchanges had the advantage of being a regularly meeting market, which enabled traders to become more specialized and engage in more complicated transactions.[2][4] As early as the middle of the sixteenth century, people in Amsterdam speculated in grain and, somewhat later, in herring, spices, whale-oil, and even tulips. The Amsterdam Bourse in particular was the place where this kind of business was carried on. This institution began as an open-air market in Warmoestreet, later moved for a while to the 'New Bridge' (Nieuwe Brug). Early trading in Amsterdam in the early 16th century (1560s–1611) largely occurred by the Nieuwe Brug bridge, which crosses the Damrak near Amsterdam Harbor.[17][18] Its proximity to the harbor and incoming mail made it a sensible location for traders to be the first to get the latest commercial news.[19] Trading also flourished in the 'church square' near the Oude Kerk.[20]
The city of Amsterdam then ordered the construction of an exchange in Dam Square. It was built by Hendrick de Keyser and opened for business in 1611. Various sections of the building were marked for commodity trading and VOC securities.[21] A bye-law on trade in the city dictated that trade could only take place in the exchange on weekdays from 11 a.m. to noon.[22] While only a short amount of time for trading inside the building, the window created a flurry of investors that in turn made it easier for buyers to find sellers and vice versa. Thus, the building of the stock exchange led to a vast expansion of liquidity in the marketplace. In addition, trading was continued in other buildings, outside of the trading hours of the exchange, such as the trading clubs, and was not prohibited in hours outside of those outlined in the bye-law.[22]
The location of exchange relative to the East India House was also strategic. Its proximity gave investors the luxury of walking a short distance to both register the transaction in the official books of the VOC, and complete the money transfer in the nearby Exchange Bank, also in Dam square.[22]
Jan David Zocher constructed a new building for the exchange near the Dam/Damrak. It opened in 1845 and was designed as a Greek temple with columns in front.
Between 1896 and 1903 the large red brick Beurs van Berlage on the Damrak was constructed. It became the building of the Amsterdam exchanges in 1903. Today it serves as a venue for concerts, exhibitions and conferences.
In 1914 the stock exchange moved to a new building in Beursplain 5, next to the old building, where it remains today.
A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets with buyers and sellers consummating transactions via open outcry at a central location such as the floor of the exchange or by using an electronic trading platform.
The United East India Company and commonly known as the Dutch East India Company, was a chartered trading company and the first joint-stock company in the world. Established on 20 March 1602 by the States General of the Netherlands existing companies, it was granted a 21-year monopoly to carry out trade activities in Asia. Shares in the company could be bought by any resident of the United Provinces and then subsequently bought and sold in open-air secondary markets. The company possessed quasi-governmental powers, including the ability to wage war, imprison and execute convicts, negotiate treaties, strike its own coins, and establish colonies. Also, because it traded across multiple colonies and countries from both the East and the West, the VOC is sometimes considered to have been the world's first multinational corporation.
A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.
A stockbroker is an individual or company that buys and sells stocks and other investments for a financial market participant in return for a commission, markup, or fee. In most countries they are regulated as a broker or broker-dealer and may need to hold a relevant license and may be a member of a stock exchange. They generally act as a financial advisor and investment manager. In this case they may also be licensed as a financial adviser such as a registered investment adviser.
Euronext N.V. is a pan-European bourse that provides trading and post-trade services for a range of financial instruments.
Oslo Stock Exchange is a stock exchange within the Nordic countries and offers Norway's only regulated markets for securities trading today. The stock exchange offers a full product range including equities, derivatives and fixed income instruments.
The AEX index, derived from Amsterdam Exchange index, is a stock market index composed of Dutch companies that trade on Euronext Amsterdam, formerly known as the Amsterdam Stock Exchange. Started in 1983, the index is composed of a maximum of 25 of the most frequently traded securities on the exchange. It is one of the main national indices of the stock exchange group Euronext alongside Euronext Brussels' BEL20, Euronext Dublin's ISEQ 20, Euronext Lisbon's PSI-20, the Oslo Bors OBX Index, and Euronext Paris's CAC 40.
NYSE Euronext, Inc. was a transatlantic multinational financial services corporation that operated multiple securities exchanges, including the New York Stock Exchange, Euronext and NYSE Arca. NYSE merged with Archipelago Holdings on March 7, 2006, forming NYSE Group, Inc. On April 4, 2007, NYSE Group, Inc. merged with Euronext N.V. to form the first global equities exchange, with its headquarters in Lower Manhattan. The corporation was then acquired by Intercontinental Exchange, which subsequently spun off Euronext.
Euronext Lisbon is a stock exchange in Lisbon, Portugal. It is part of Euronext pan-European exchange. The most famous index is PSI-20.
The Bank of Amsterdam or Wisselbank was an early bank, vouched for by the city of Amsterdam, and established in 1609. It was the first public bank to offer accounts not directly convertible to coin. As such, it has been described as the first true central bank, even though that view is not uniformly shared. The Amsterdam Wisselbank was also active in the production of coins. For decades the assay master of the Bank sent out stocks of gold and silver to the various Mints in the United Netherlands to receive new coins in return.
José or Joseph Penso de la Vega, best known as Joseph de la Vega, was a Sephardi Jewish merchant in diamonds, financial expert, moral philosopher and poet, residing in Amsterdam. He became famous for his masterpiece Confusion of Confusions. Vega's work is the first study written about the Amsterdam Stock Exchange and its participants, the shareholders. In a stilted style he describes the whole gamut, running from options, futures contracts, margin buying, to bull and bear conspiracies, even some form of stock-index trading. The publication of Confusión de Confusiones helped lay the foundations for modern fields of technical analysis and behavioral finance.
Femme Simon Gaastra was a Dutch Professor of maritime history at the University of Leiden and a leading expert on the history of the Dutch East India Company.
The financial history of the Dutch Republic involves the interrelated development of financial institutions in the Dutch Republic. The rapid economic development of the country after the Dutch Revolt in the years 1585–1620 accompanied by an equally rapid accumulation of a large fund of savings, created the need to invest those savings profitably. The Dutch financial sector, both in its public and private components, came to provide a wide range of modern investment products beside the possibility of (re-)investment in trade and industry, and in infrastructure projects. Such products were the public bonds, floated by the Dutch governments on a national, provincial, and municipal level; acceptance credit and commission trade; marine and other insurance products; and shares of publicly traded companies like the Dutch East India Company (VOC), and their derivatives. Institutions like the Amsterdam stock exchange, the Bank of Amsterdam, and the merchant bankers helped to mediate this investment. In the course of time the invested capital stock generated its own income stream that caused the capital stock to assume enormous proportions. As by the end of the 17th century structural problems in the Dutch economy precluded profitable investment of this capital in domestic Dutch sectors, the stream of investments was redirected more and more to investment abroad, both in sovereign debt and foreign stocks, bonds and infrastructure. The Netherlands came to dominate the international capital market up to the crises of the end of the 18th century that caused the demise of the Dutch Republic.
Stocks consist of all the shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from liquidation of assets, or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued, for example, without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.
An exchange, bourse, trading exchange or trading venue is an organized market where (especially) tradable securities, commodities, foreign exchange, futures, and options contracts are bought and sold.
Isaac Le Maire was a Dutch entrepreneur, investor, and a sizeable shareholder of the Dutch East India Company (VOC). He is best known for his constant strife with the VOC, which ultimately led to the discovery of Cape Horn.
Jacobus Ruurd "Jaap" Bruijn, was a Dutch maritime historian. He was professor of maritime history at the University of Leiden from 1979 until his retirement in 2003. During his 41-year teaching career as The Netherlands' only university professor of maritime history, he guided the doctoral theses of at least 49 graduate students.
The Dutch East India Company was a chartered company which issued a considerable series of coinage in bronze, silver and gold for its territories in the Far East between 1602 and 1799.
Dirck van Os was an Amsterdam merchant, insurer, financier and shipowner. He is among the founders of the Compagnie van Verre, the Amsterdam Exchange Bank and the United East India Company (VOC).
East India Company Ordinances were the Dutch laws on slavery in 1622. The scarcity of references to the nightly trading sessions might indicate that there was some kind of private regulatory mechanism in place. The word collegie implies that the meetings had an official character, with some kind of committee that organized and chaired the meetings. It could well be that this committee also adjudicated conflicts. This point takes up a large part of chapter 3, but it is important to stress at this point that peer pressure and easy monitoring reduced the chances of reneging and hence of costly litigation. With their legal personhood, permanent capital, transferable shares, separation of ownership and management, and limited liability, the Dutch and English colonial trading companies VOC and EIC are considered institutional breakthroughs. We analyze the VOC's business operations and financial policy and show that its novel corporate form owed less to foresight than to piecemeal engineering to remedy design flaws. The crucial feature of managerial limited liability was not, as previously thought, integral to that design, but emerged only after protracted experiments with various solutions to the company's financial bottlenecks. Legal form followed economic function, not the other way around. Despite the presence of a central Asian headquarters in Batavia, even the numerous settlements of the Dutch East India Company or VOC (1602–1799) had separate administrations and record keeping. Second, unlike the Atlantic slave complex, European and preexisting indigenous forms of bondage seemingly shared many forms of similarities. Except for South Africa, European colonial powers took over and interacted with existing Indian Ocean systems of slavery, rather than imposing their own system in a relative vacuum as in the New World.
1 2 3 Stringham, Edward (2003). "The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam". Quarterly Review of Economics and Finance. 43 (2): 321. SSRN1676251.
↑ Joseph Penso de la Vega: Confusión de Confusiones; 1668, reprint Wiley, 1996.
1 2 Vries, Jan de, and A. van der Woude. The First Modern Economy. Success, Failure, and Perseverance of the Dutch Economy, 1500–1815, (Cambridge University Press, 1997), ISBN978-0-521-57825-7 p. 384–385
1 2 3 4 5 The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602–1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 2011 p. 2
↑ The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 2011 20
1 2 3 4 John F. Padgett, Walter W. Powell. The Emergence of Organizations and Markets. (Princeton University Press, 2012. 14 Oct 2012). ISBN1400845556, 9781400845552 p. 227
↑ The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 p.110
↑ The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 p.41
↑ Fergusson, Niall. The Ascent of Money – A Financial History of the World (2009ed.). London: Penguin Books. p.133.
↑ De la Vega, J. P. (1688). Fridson, Martin (ed.). Confusion de Confusiones (trans.) (1996ed.). New York: Wiley.
↑ J.G. van Dillen, 'Termijnhandel te Amsterdam in de 16de en 17de eeuw', De Economist 76 (1927) 503-523, there 503.
↑ The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 p. 19
↑ The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 p.19
↑ Kellenbenz, H. (1957). Introduction to Confusion de Confusiones (In M. Fridson (Ed.) Confusion de Confusionesed.). New York: Wiley. pp.125–146.
↑ The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 p. 30
1 2 3 The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. The world’s first stock exchange: how the Amsterdam market for Dutch East India Company shares became a modern securities market, 1602-1700. L.O. Petram. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011. FGw: Instituut voor Cultuur en Geschiedenis (ICG). 2011 p.30
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