Identification

• The Amsterdam stock exchange ("Vereniging voor de Effectenhandel") is believed to be the oldest exchange in the world where the first stock ever issued was traded. Trading on Damrak Street in Amsterdam began at the beginning of the 17th century and continued in the original location until 1835. The exchange remains active more than four centuries later only a short distance from where it started.
  
  

History

• In the centuries preceding the Amsterdam stock exchange, corporations and stock markets as they are understood today simply did not exist. Most financial transactions were just the borrowing and lending that constitutes basic banking. Markets for trading loans were fairly developed by the 12th century. Commodities and sovereign debt, money owed by the royal families of various nations, were actively traded in the 13th century. But it wasn't until the Age of Discovery, when European nations sought to colonize the Western Hemisphere, that the need for innovative financing would give birth to the first stock exchange.
  
  

Features

• The Dutch East India Company, or Vereinigte Oostindische Compaignie, issued the first stock in 1602. The huge costs of exploration and colonization required constant inflows of capital and involved large amounts of risk. By issuing shares, the company could raise money from many different investors while spreading the risk of loss. The company founded the Amsterdam exchange as a place to trade its stock and bonds. Though modest by modern standards, the Amsterdam bourse, as it was called, was a major source of financing for a company that would control one fifth of the world's population at its height.
  
  

Significance

• In addition to the place where the world's first stock was traded, the Amsterdam stock exchange is also credited as the place where short selling first occurred, where derivatives such as options trading and debt-equity swaps were created and where merchant banking and unit trusts were developed.
  
  

Effects

• The success of the Amsterdam stock exchange has led to the creation of a national stock exchange in every major developed nation in the world. Stock exchanges today are viewed as an integral part of a robust economy, where investors can put their capital to productive use and successful businesses can obtain low cost financing. Euronext Amsterdam, the first pan-European exchange remains a hub of derivatives trading.