First stock exchange founded in Amsterdam was Peer-2-Peer and the trade was based on mutual trust and direct contact — without third-party intervention. Author: Małgorzata Halaba


February 21, 2022

When looking at contemporary stock exchanges, we tend to perceive them as the highest standard of modernity. That’s because we think the trading instruments are very recent inventions that could not exist without computers, automation, and a row of blinking screens.

How very wrong! The idea and practice of the stock market are, in fact, more than 400 years old. The same goes for publicly listed companies, shares, quotes, short-selling, options, and bonds. Not to mention the access to necessary capital, information, and mutual trust — all the things necessary to make a trade.

In short — not much changed over the years, except for one thing: direct access to the trading floor and the exchange. Or, as we would say today — P2P trade, just like on BigShortBets DAO Market.

Access to information is another crucial factor that has changed over the years: free flow and the free exchange of market-moving news somehow got restricted to more powerful investors, shutting off the small ones.

But let’s start from humble beginnings. The first stock exchange was founded in 1602 in Amsterdam. That makes it the oldest, still in operation, stock exchange globally, together with the incorporation of the Dutch East India Company (VOC), the oldest publicly listed company.

But that’s an official date. The first regular market functioned in the second half of the 15th century, with regular traders meeting near the harbour in the Warmoesstraat. The open-air market operated until the second haft of the 16th century when the traders moved to the Nieuwe Brug, and in 1611 they acquired a building of their own.

What did the trade look like? Or rather, how did the shares change hands? The process was quite simple, albeit it could get heated: a member of the exchange would open his hand while the other would take it, marking the sale of the shared at a fixed price, and the second handshake would confirm the price. A new sale (or an acquisition) would be conducted in the same way — with more clasps and handshakes. And while shouting, pushes and even insults often accompanied the deals, the trade was based on mutual trust and direct contact — without third-party intervention.

Then, the investors understood the importance of good, reliable, and timely information. Thus, the stock exchange was not only the place where shares were changing hands and deals made — people used to come there not just to do business but also to listen to the latest news and share tips. The access to information was free and unlimited, depending on everybody’s skills and a network of contacts.

Step by step, regulations came. Finally, in 1562, Amsterdam’s city council passed the first ones to ensure that market trading was conducted orderly. The set of laws fixed the trading hours and the code of conduct. So, as it often happens, the good intentions slowly dissolved in an ocean of limitations and restrictions combined with penalties. Today, a direct sale or buy is difficult, if not impossible, while access to credible information is freely available to the most influential investors.

The first-ever list is much longer.

The Amsterdam Stock Exchange had also seen the first initial public offering (IPO) ever when the Dutch East India Company (VOC) issued shares addressed to the public. And that’s how it all has started — the trade in VOC shares paved the way for others. Then, step by step, more entities got listed.

In 1624, another instrument was introduced: following a dike burst, the local water authorities decided to issue fixed-interest bonds to finance the repair works. Even more interesting is that debt is the oldest perpetual bond that still pays interest — 15 euros a year.

The Amsterdam Stock Exchange’s first-ever list is longer. In 1774, a local broker Abraham van Ketwich established the world’s first investment fund, enabling retail investors to disperse their risks by dividing their investments over several stocks.

And — finally — the Amsterdam stock exchange has also seen the first investment bubble, ‘the tulip mania,’ when, between 1634 and 1637, the price of the exotic plant soared from 20 to 1200 guilders nosedive shortly after. But that’s the topic for another story.

BigShortBets Talks is a series of articles and interviews created in cooperation with real writers and entrepreneurs that gives the opportunity to grasp a new perspective on modern economy, markets and regulations.”

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