Assets Markets: What they are, Where they Live, How they Reproduce [Part 3]

Em Português

After having explored what kind of markets is out there, learning what are capital markets, money market, Forex and types of assets are traded on each of them, today I will tell you a bit about the history of the financial markets.

Yes, history, as George Santayana, "Those who dontt remember the past is condemned to repeat it. "

Once upon a time ...

A long long time ago (4500 BC), at a time when humans were beginning to discover and improve commerce, farmers of [Sumer] recorded on clay slabs promises of delivering commodities at a certain point in time, creating something we could call the first futures market that ever existed in the world (at least the most ancient one that archaeologists have discovered so far).

Centuries have passed, tradings taking place, currency as a form of exchange arising until we reach and jump into the 11th century, farmers began to meet in central locations to negotiate their productions. Located in the cities, the markets were the meeting places between sellers and buyers. In France, for example, brokers began to manage the debts of farmers on behalf of the banks.

By 1300 the merchants of Venice, who were already lending money, and negotiating the property of debts among themselves, were pioneers in acquiring government debt securities, and negotiating the trade of these bonds for other consumers, who would be the first private investors.

Around 1531, in Belgium, the first samples of the commodity markets of the modern world. In Antwerp, brokers and usurers met in a "stock market" to negotiate debt securities of both governments and individuals or companies. In both Belgium and Amsterdam, various types of commodity contracts were traded, such as short-term contracts, futures contracts and options. Only stocks were not traded, because they didn't existed yet.

The era of great navigations

In the year 1581, seven northern European provinces formed an alliance, forming the Republic of the Seven Provinces of Netherlands, also known as Holland.

It was a region without many physical resources, so its economic development ended up happening through trade, which put the region as one of the protagonists in the great maritime expanses of Europe.

It was the time of the great navigations, with many expeditions financed by both private capital and governments, with the aim of finding new markets around the world. The common thing was that the expeditions created were liquidated as soon as the voyage was over, and the profit being distributed among those who made the investment.

With the creation of the East India Company by the British in the 1600s the trade power of the Dutch was threatened.

In response to this move by the British, the Dutch Government sponsored the creation of the Dutch East India Company, named of Vereenigde Oost-Indische Compagnie (but may call VOC), and holder of the Dutch monopoly on the exploration and trading of spices from the East.

The creation of VOC however was a bit different ...

To fund its creation, the VOC publicly offered to sell shares to anyone who wanted to invest in the spice trade. This was officially the first public offering of shares in history.

Dividends paid to holders of shares ranged from 12% to 63%.

Remember the famous Tulip Bubble that a few days ago everyone compared it to the bitcoin and to the crypto-coins? Yeah ... the VOC was the main responsible for it to happen.

Despite this, the company generated huge profits until its closure in 1800.

The fiat currency

Dutch trading activities generated a large flow of minted coins from all over the world.

With some specific laws in practice with regard to payment of debts, in which I will not extend much, began to occur a situation where foreign minted coins entering the country with high amount of high value metals but low legal value, were being used to mint coins with less and less precious metals in them. There were several mints, so because of the competition, then each of them sought small incremental reductions to increase their profit margin.

In 1609, the Dutch government, seeking a solution to the problem of this incremental devaluation, created the Wisselbank, also known as the Bank of Amsterdam.

The main function of this bank was to function as a currency exchange office where merchants could deposit (paying a fee every 6 months) their currencies that met a certain standard, and in return they would receive a bank certificate (banco shillegen).

This certificate gave the bearer the right to "withdraw" the coins at his discretion, and this right belonged to the holder of the certificate and could therefore be exchanged for any other merchandise (provided the other party accepted).

Basically, they invented the basis of modern fiduciary money, and the central bank.

The model spreads and negotiations in the coffee shops

With the flow of time, company shares and debt securities stated to become popular among investors, and more and more of these securities were emerging, spreading across various business sectors.

However, there were no easily acessible locations for the trading of securities, and in London trading in the city's coffee shops were commonplace, where brokers and investors placed buying and selling ads.

Imagine you wanting to buy a stock in a company today and having to go to the nearest Starbucks and announce that you wanted to buy stocks?

And being something new, there were companies that came out of nowhere, promising some incredible expedition, but ultimately recieved all the money from the investors and delivered absolutely nothing. (Does it look like something we have in the world today? It starts with crypto ...)

And Finally the arrival the first morden stock market

Even in spite of all this hysteria, of innumerable losses, and the English government banning the issuance of shares, in 1801 the first stock market of the world was created, that is the closest to the model we have today.

But due to the ban on issuing shares by the British government until 1825, the London Stock Exchange did not get much prominence in a world scenario.

This role of the assets markets was taken by the New York Stock Exchange, created in 1817. Although it wasn't the first stock market in the United States (title that belongs to Philadelphia Stock Exchange), it became the most important market in the world.

In 1848, the CBOT (Chicago Board of Trade) laid the groundwork for current trading patterns for futures contracts and options.

The beginning of the modern era of the markets

1971 witnessed the emergence of NASDAQ , the first stock exchange in the world that did not had a defined physical space for negotiations. All trades were carried out through a network.

The NASDAQ had an important role in the beginning of the digital age, since it has a significant participation in the development of the digital age. In addition to being a fully digital Stock Exchange, almost all technology-related companies have listed their shares at NASDAQ
.

Today and the future

The rise of the internet and the technology developed since the emergence of the NASDAQ, allows an easy access to markets today, where with a few monies, it is possible to participate in asset markets. This is a huge improvement over the past, especially since anyone with an interest can find some way to get into the game.

And more changes appear on the horizon.

With the advent of the cryptocurrencies and the blockchains, the accessibility is expanding further, and many possibilities open to the future, such as an ever-growing variety of available exchanges and fully decentralized markets, such as Bitshares and some other projects that are under development.

I see a very interesting future for anyone who have an interest in this world.