What is the Stock Market?

The stock market refers to the market of stocks for the public to issue, buy, and sell stocks for trading purposes on a stock exchange. Stocks are generally known as equities which represent the percentage of the ownership in a company, depending upon the fraction of shares you have of a particular company.

An equity market is also considered the most significant aspect of a market economy. It opens ways for companies access to capital to expand or grow their business.

The stock market is a collection of markets and exchanges place where regular buying, selling, and issuance of publicly owned companies’ shares takes place. All these financial activities are operated with a defined set of regulations through over-the-counter (OTC) marketplaces or institutionalized formal exchanges. There can be more than one stock trading venues that facilitate stock and other forms of securities transaction in a country or a region.

“Stock market or Stock exchange” – both terms are used interchangeably. The major stock market exchanges in the U.S are the New York Stock Exchange (NYSE), Chicago Board Options Exchange (CBOE), and Nasdaq. All these leading stock exchanges along with several other exchanges, all operate within a country and forms the stock market of the U.S.A

The Stock Market is a place to trade ownership of a firm by selling or buying stock. The Smooth functioning of the stock market is very important for economic development.

Though as the name suggests, the stock market is generally known for trading in equities or stocks, however, its scope is not limited to these services only. It deals with other financial securities also such as exchange-traded funds (ETF), corporate bonds, and derivates based on currencies, commodities, stocks, and bonds.

But where does this concept of trading in stock came from? For this let’s get into the history of stock trading…

What is the History of Stock Trading?

Stock trading is as old as the mid-1500s, but modern stock trading started gaining recognition with the trading of shares of East India Company in London.

Early Days of Trading

Back in the 1600s, all goods transported from the east were through the sea with lots of risks often known as Hailstorms, Pirates, etc. So in order to alleviate these risks, owners of the ship ask investors to volunteer financial collateral for the journey. In return, these investors will get a portion of the monetary amount if ships loaded with goods made it back successfully.

This is an old example of trading that used to happen in those days. It is a kind of limited liability company that makes many people held together for one trip. But the revolution was led by the East Indian Company.

The East India Company

New investment models come into existence with the formation of East India Company in London. Importing companies started to offer stocks that state partial ownership in the company by offering investors returns on all proceeds the company funded instead of only a single ship.

This model enabled companies to ask for bigger investments enabling them to increase the size of the fleets in terms of numbers. Investing in these companies became very popular because of the massive profits, investors got from their investing.