IF 2008 - chapter 7 (Stock Exchange).doc

IF 2008 – chapter 7 Stock Exchange History of Associations for Trading Development of joint stock company The first joint stock company: in 1553, 250 merchants of England put up ￡25 each to equip ships to find a North East route to China The East India Company of the Great Britain was formed in 1600 The United East India Company of the Netherlands in 1602 The Hudson Bay Company in 1668 Stock Exchange development Amsterdam opened a stock exchange in 1611, Europe’s oldest Paris Bourse was established in 1724 – but not particularly active Austrian Bourse opened in Vienna in 1771, largely to trade government bonds to finance war – in the end of 19c, 2500 equities listed In London, brokers and jobbers met in coffee houses in 18c New Jonathan’s Coffee House was converted into the Stock Exchange in 1773 to regulate the market In New York, dealers in stock met each noon at 22 Wall Street in 1792 – most trading government’s bonds and banks’ shares New York Stock Exchange and Board was set up in 1817 by 1900, NYSE became totally dominant among 250 stock exchanges in America due to the introduction of the telegraph and ticker-tape Stock Exchange Mechanism The Role of Stock Exchange Providing the regulation of company listings - sometimes this is done by government sponsored bodies US: the Securities and Exchange Commission A price formation mechanism The supervision of trading Authorization of members Settlement of transactions UK: CREST Co. took over settlement from London Stock Exchange Publication of trade data and prices Stocks and Shares Definition: Shares: equities in companies, paying a variable dividend Stocks: instruments where the payment is by way of interest, such as bonds and similar instruments – a much more vaguer term in everyday mode of speech US – shares are ‘common stock’ UK - the term ‘stocks’ is frequently used to mean either shares or bonds General Distinction Exchange always split turnover between the fixed interest element and equ