A 400-year evolution of global stock markets (and capital markets in general)
Courtyard of the Amsterdam stock exchange (Beurs van Hendrick de keyser In Dutch),The foremost center of global securities markets in the 17th century.
The trading floor of the new work stock exchange (NYSE) in the blooming era of internet.
A stock market, equity market is the aggregation of buyers and sellers (a loose network of economy transactions, not a physical facility or discrete entity) of stock (also called share) which represent ownership claim of business ;These may include securities listed on a public stock exchange as well as those only traded privately. Example, of the letter Include shares of private companies which are sold to investors through equity crowd funding platforms. Stock exchange list shares of common equity as well as other security types, e.g corporate bonds and convertible bonds.
Size of the market :-
The trading floor of the new work stock exchange (NYSE) in the blooming era of internet.
A stock market, equity market is the aggregation of buyers and sellers (a loose network of economy transactions, not a physical facility or discrete entity) of stock (also called share) which represent ownership claim of business ;These may include securities listed on a public stock exchange as well as those only traded privately. Example, of the letter Include shares of private companies which are sold to investors through equity crowd funding platforms. Stock exchange list shares of common equity as well as other security types, e.g corporate bonds and convertible bonds.
Size of the market :-
Stocks are categorised in various ways. One way is by the country where the company is domiciled. For example, Nestlé and Novartisare domiciled in Switzerland, so they may be considered as part of the Swiss stock market, although their stock may also be traded on exchanges in other countries, for example, as American depository receipts (ADRs) on U.S. stock markets.
As of mid 2017, the size of the world stock market (total market capitalisation) was about US$76.3 trillion.[1] By country, the largest market was the United States (about 34%), followed by Japan (about 6%) and the United Kingdom (about 6%).[2] These numbers increased in 2013.
As of 2015, there are a total of 60 stock exchanges in the world with a total market capitalization of $69 trillion. Of these, there are 16 exchanges with a market capitalization of $1 trillion or more, and they account for 87% of global market capitalization. Apart from the Australian Securities Exchange, these 16 exchanges are based in one of three continents: North America, Europe and Asia.
As of 2015, there are a total of 60 stock exchanges in the world with a total market capitalization of $69 trillion. Of these, there are 16 exchanges with a market capitalization of $1 trillion or more, and they account for 87% of global market capitalization. Apart from the Australian Securities Exchange, these 16 exchanges are based in one of three continents: North America, Europe and Asia.
Stock exchange :-
A stock exchange is an exchange (or bourse)[note 1] where stock brokers and traderscan buy and sell shares of stock, bonds, and other securities. Many large companies have their stocks listed on a stock exchange. This makes the stock more liquid and thus more attractive to many investors. The exchange may also act as a guarantor of settlement. Other stocks may be traded "over the counter" (OTC), that is, through a dealer. Some large companies will have their stock listed on more than one exchange in different countries, so as to attract international investors.[7]
Stock exchanges may also cover other types of securities, such as fixed interest securities (bonds) or (less frequently) derivatives which are more likely to be traded OTC.
Stock exchanges may also cover other types of securities, such as fixed interest securities (bonds) or (less frequently) derivatives which are more likely to be traded OTC.
Trade :-
The New York stock exchange
The London stock exchange
Trade in stock markets means the transfer for money of a stock or security from a seller to a buyer. This requires these two parties to agree on a price. Equities (stocks or shares) confer an ownership interest in a particular company.
Participants in the stock market range from small individual stock investors to larger trader investors, who can be based anywhere in the world, and may include banks, insurance companies, pension funds and hedge funds. Their buy or sell orders may be executed on their behalf by a stock exchange trader.
Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This method is used in some stock exchanges and commodity exchanges, and involves traders shouting bid and offer prices. The other type of stock exchange has a network of computers where trades are made electronically. An example of such an exchange is the NASDAQ.
A potential buyer bids a specific price for a stock, and a potential seller asks a specific price for the same stock. Buying or selling at the market means you will accept any ask price or bid price for the stock. When the bid and ask prices match, a sale takes place, on a first-come, first-served basis if there are multiple bidders or askers at a given price.
The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace. The exchanges provide real-time trading information on the listed securities, facilitating price discovery.
The New York Stock Exchange (NYSE) is a physical exchange, with a hybrid market for placing orders electronically from any location as well as on the trading floor. Orders executed on the trading floor enter by way of exchange members and flow down to a floor broker, who submits the order electronically to the floor trading post for the Designated Market Maker ("DMM") for that stock to trade the order. The DMM's job is to maintain a two-sided market, making orders to buy and sell the security when there are no other buyers or sellers. If a spread exists, no trade immediately takes place – in this case the DMM may use their own resources (money or stock) to close the difference. Once a trade has been made, the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Computers play an important role, especially for program trading.
The NASDAQ is a virtual exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock.
The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor of the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated.
People trading stock will prefer to trade on the most popular exchange since this gives the largest number of potential counterparties (buyers for a seller, sellers for a buyer) and probably the best price. However, there have always been alternatives such as brokers trying to bring parties together to trade outside the exchange. Some third markets that were popular are Instinet, and later Island and Archipelago (the latter two have since been acquired by Nasdaq and NYSE, respectively). One advantage is that this avoids the commissions of the exchange. However, it also has problems such as adverse selection.[8] Financial regulators are probing dark pools.[9][10]
Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This method is used in some stock exchanges and commodity exchanges, and involves traders shouting bid and offer prices. The other type of stock exchange has a network of computers where trades are made electronically. An example of such an exchange is the NASDAQ.
A potential buyer bids a specific price for a stock, and a potential seller asks a specific price for the same stock. Buying or selling at the market means you will accept any ask price or bid price for the stock. When the bid and ask prices match, a sale takes place, on a first-come, first-served basis if there are multiple bidders or askers at a given price.
The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace. The exchanges provide real-time trading information on the listed securities, facilitating price discovery.
The New York Stock Exchange (NYSE) is a physical exchange, with a hybrid market for placing orders electronically from any location as well as on the trading floor. Orders executed on the trading floor enter by way of exchange members and flow down to a floor broker, who submits the order electronically to the floor trading post for the Designated Market Maker ("DMM") for that stock to trade the order. The DMM's job is to maintain a two-sided market, making orders to buy and sell the security when there are no other buyers or sellers. If a spread exists, no trade immediately takes place – in this case the DMM may use their own resources (money or stock) to close the difference. Once a trade has been made, the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Computers play an important role, especially for program trading.
The NASDAQ is a virtual exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock.
The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor of the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated.
People trading stock will prefer to trade on the most popular exchange since this gives the largest number of potential counterparties (buyers for a seller, sellers for a buyer) and probably the best price. However, there have always been alternatives such as brokers trying to bring parties together to trade outside the exchange. Some third markets that were popular are Instinet, and later Island and Archipelago (the latter two have since been acquired by Nasdaq and NYSE, respectively). One advantage is that this avoids the commissions of the exchange. However, it also has problems such as adverse selection.[8] Financial regulators are probing dark pools.[9][10]
Market participant :-
The offices of Bursa Malaysia, Malaysia's national stock exchange (known before demutualization as Kuala Lumpur Stock Exchange)
Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations trading in their own shares. Some studies have suggested that institutional investors and corporations trading in their own shares generally receive higher risk-adjusted returns than retail investors.[11]
A few decades ago, most buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions).
The rise of the institutional investor has brought with it some improvements in market operations. There has been a gradual tendency for "fixed" (and exorbitant) fees being reduced for all investors, partly from falling administration costs but also assisted by large institutions challenging brokers' oligopolistic approach to setting standardised fees.[citation needed] A current trend in stock market investments includes the decrease in fees due to computerized asset management termed Robo Advisers within the industry. Automation has decreased portfolio management costs by lowering the cost associated with investing as a whole.
Trends in market participation :-
Stock market participation refers to the number of agents who buy and sell equity backed securities either directly or indirectly in a financial exchange. Participants are generally subdivided into three distinct sectors; households, institutions, and foreign traders. Direct participation occurs when any of the above entities buys or sells securities on its own behalf on an exchange. Indirect participation occurs when an institutional investor exchanges a stock on behalf of an individual or household. Indirect investment occurs in the form of pooled investment accounts, retirement accounts, and other managed financial accounts.
Indirect vs. direct investment :-
The total value of equity-backed securities in the United States rose over 600% in the 25 years between 1989 and 2012 as market capitalization expanded from $2,790 billion to $18,668 billion.[12] Direct ownership of stock by individuals rose slightly from 17.8% in 1992 to 17.9% in 2007, with the median value of these holdings rising from $14,778 to $17,000.[13][14] Indirect participation in the form of retirement accounts rose from 39.3% in 1992 to 52.6% in 2007, with the median value of these accounts more than doubling from $22,000 to $45,000 in that time.[13][14]Rydqvist, Spizman, and Strebulaev attribute the differential growth in direct and indirect holdings to differences in the way each are taxed in the United States. Investments in pension funds and 401ks, the two most common vehicles of indirect participation, are taxed only when funds are withdrawn from the accounts. Conversely, the money used to directly purchase stock is subject to taxation as are any dividends or capital gains they generate for the holder. In this way the current tax code incentivizes individuals to invest indirectly.[15]
Participation by income and wealth strata :-
Rates of participation and the value of holdings differs significantly across strata of income. In the bottom quintile of income, 5.5% of households directly own stock and 10.7% hold stocks indirectly in the form of retirement accounts.[14] The top decile of income has a direct participation rate of 47.5% and an indirect participation rate in the form of retirement accounts of 89.6%.[14] The median value of directly owned stock in the bottom quintile of income is $4,000 and is $78,600 in the top decile of income as of 2007.[16] The median value of indirectly held stock in the form of retirement accounts for the same two groups in the same year is $6,300 and $214,800 respectively.[16] Since the Great Recession of 2008 households in the bottom half of the income distribution have lessened their participation rate both directly and indirectly from 53.2% in 2007 to 48.8% in 2013, while over the same time period households in the top decile of the income distribution slightly increased participation 91.7% to 92.1%.[17] The mean value of direct and indirect holdings at the bottom half of the income distribution moved slightly downward from $53,800 in 2007 to $53,600 in 2013.[17] In the top decile, mean value of all holdings fell from $982,000 to $969,300 in the same time.[17] The mean value of all stock holdings across the entire income distribution is valued at $269,900 as of 2013.[17]
Participation by head of household race and gender :-
The racial composition of stock market ownership shows households headed by whites are nearly four and six times as likely to directly own stocks than households headed by blacks and Hispanics respectively. As of 2011 the national rate of direct participation was 19.6%, for white households the participation rate was 24.5%, for black households it was 6.4% and for Hispanic households it was 4.3% Indirect participation in the form of 401k ownership shows a similar pattern with a national participation rate of 42.1%, a rate of 46.4% for white households, 31.7% for black households, and 25.8% for Hispanic households. Households headed by married couples participated at rates above the national averages with 25.6% participating directly and 53.4% participating indirectly through a retirement account. 14.7% of households headed by men participated in the market directly and 33.4% owned stock through a retirement account. 12.6% of female headed households directly owned stock and 28.7% owned stock indirectly.
Determinants and possible explanations of stock market participation :-
In a 2003 paper by Vissing-Jørgensen attempts to explain disproportionate rates of participation along wealth and income groups as a function of fixed costs associated with investing. Her research concludes that a fixed cost of $200 per year is sufficient to explain why nearly half of all U.S. households do not participate in the market.[18] Participation rates have been shown to strongly correlate with education levels, promoting the hypothesis that information and transaction costs of market participation are better absorbed by more educated households. Behavioral economists Harrison Hong, Jeffrey Kubik and Jeremy Stein suggest that sociability and participation rates of communities have a statistically significant impact on an individual’s decision to participate in the market. Their research indicates that social individuals living in states with higher than average participation rates are 5% more likely to participate than individuals that do not share those characteristics.[19] This phenomenon also explained in cost terms. Knowledge of market functioning diffuses through communities and consequently lowers transaction costs associated with investing.
History :-
The term bourse is derived from the 13th-century inn named "Huis ter Beurze" (center) in Bruges. From predominantly Dutch-speaking cities of the Low Countries (like Bruges and Antwerpt), the term 'beurs' spread to other European states where it was corrupted into 'bourse', 'borsa', 'bolsa', 'börse', etc.
Early history :-
In 12th-century France, the courretiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief[citation needed] is that, in late 13th-century Bruges, commodity traders gathered inside the house of a man called Van der Beurze, and in 1409 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred;[20]the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring countries and "Beurzen" soon opened in Ghent and Rotterdam.
In the middle of the 13th century, Venetianbankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city-states not ruled by a duke but a council of influential citizens. Italian companies were also the first to issue shares. Companies in England and the Low Countries followed in the 16th century.
Birth of formal stock market :-
Replica of an East Indiaman of the Dutch East India Company/United East Indies Company (VOC). The Dutch East India Company was the first corporation to be ever actually listed on an official stock exchange. In 1611, the world's first stock exchange (in its modern sense) was launched by the VOC in Amsterdam. In Robert Shiller's own words, the VOC was "the first real important stock" in the history of finance.[21]
One of the oldest known stock certificates, issued by the VOCchamber of Enkhuizen, dated 9 Sep 1606.[22][23][24][25] The first formal stock market in its modern sense – as one of the indispensable elements of modern capitalism[26] – was a pioneering innovation by the VOC managers and shareholders in the early 1600s.[27][28]
A 17th-century engraving depicting the Amsterdam Stock Exchange (Amsterdam's old bourse, a.k.a. Beurs van Hendrick de Keyser in Dutch), built by Hendrick de Keyser (c. 1612). The Amsterdam Stock Exchange was the world's first official (formal) stock exchangewhen it began trading the VOC's freely transferable securities, including bonds and shares of stock.[29]
Courtyard of the Amsterdam Stock Exchange (Beurs van Hendrick de Keyser) by Emanuel de Witte, 1653. The Amsterdam Stock Exchange is said to have been the first stock exchange to introduce continuous trade in the early 17th century. The process of buying and selling the VOC's shares, on the Amsterdam Stock Exchange, became the basis of the world's first official (formal) stock market.[30][31]
Established in 1875, the Bombay Stock Exchange is Asia's first stock exchange.
The stock market — the daytime adventure serial of the well-to-do — would not be the stock market if it did not have its ups and downs. (...) And it has many other distinctive characteristics. Apart from the economic advantages and disadvantages of stock exchanges — the advantage that they provide a free flow of capital to finance industrial expansion, for instance, and the disadvantage that they provide an all too convenient way for the unlucky, the imprudent, and the gullible to lose their money — their development has created a whole pattern of social behavior, complete with customs, language, and predictable responses to given events. What is truly extraordinary is the speed with which this pattern emerged full blown following the establishment, in 1611, of the world's first important stock exchange — a roofless courtyard in Amsterdam — and the degree to which it persists (with variations, it is true) on the New York Stock Exchange in the nineteen-sixties. Present-day stock trading in the United States — a bewilderingly vast enterprise, involving millions of miles of private telegraph wires, computers that can read and copy the Manhattan Telephone Directory in three minutes, and over twenty million stockholder
In the 17th and 18th centuries, the Dutch pioneering several financial innovations that helped lay the foundations of modern financial system.[33][34][35][36] While the Italian city-states produced the first transferable government bonds, they did not develop the other ingredient necessary to produce a fully fledged capital market: the stock market.[37] In the early 1600s the Dutch East India Company(VOC) became the first company in history to issue bonds and shares of stock to the general public.[38] As Edward Stringham(2015) notes, "companies with transferable shares date back to classical Rome, but these were usually not enduring endeavors and no considerable secondary market existed (Neal, 1997, p. 61)."[39] The Dutch East India Company (founded in the year of 1602) was also the first joint-stock company to get a fixed capital stock and as a result, continuous trade in company stock occurred on the Amsterdam Exchange. Soon thereafter, a lively trade in various derivatives, among which options and repos, emerged on the Amsterdam market. Dutch traders also pioneered short selling – a practice which was banned by the Dutch authorities as early as 1610.[40] Amsterdam-based businessman Joseph de la Vega's Confusion de Confusiones(1688)[41] was the earliest known book about stock trading and first book on the inner workings of the stock market (including the stock exchange).
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