Stock exchange
Stock exchanges may also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividends.
In the 14th century, Venetian lenders would carry slates with information on the various issues for sale and meet with clients, much like a broker does today.
Along the potential overland trade route, Holy Roman Emperor Frederick II repulsed advances by Mongol Batu Kahn (Golden Horde) in 1241.
Some view the key event as the Dutch East India Company's founding in 1602,[7] while others point to much earlier developments (Bruges, Antwerp in 1531 and in Lyon in 1548).
[8] On the other hand, economist Ulrike Malmendier of the University of California at Berkeley argues that a share market existed as far back as ancient Rome, that derives from Etruscan "Argentari".
In the Roman Republic, which existed for centuries before the Empire was founded, there were societates publicanorum, organizations of contractors or leaseholders who performed temple-building and other services for the government.
Tradable bonds as a commonly used type of security were a more recent innovation, spearheaded by the Italian city-states of the late medieval and early Renaissance periods.
By 1698, a broker named John Castaing, operating out of Jonathan's Coffee House, was posting regular lists of stock and commodity prices.
At the center of it were the South Sea Company, set up in 1711 to conduct English trade with South America, and the Mississippi Company, focused on commerce with France's Louisiana colony and touted by transplanted Scottish financier John Law, who was acting in effect as France's central banker.
By the end of that same year, share prices had started collapsing, as it became clear that expectations of imminent wealth from the Americas were overblown.
In London, Parliament passed the Bubble Act, which stated that only royally chartered companies could issue public shares.
In the 1850s, five stock brokers gathered together under a Banyan tree in front of Mumbai Town Hall, where Horniman Circle is now situated.
Construction of the present building, the Phiroze Jeejeebhoy Towers at Dalal Street, Fort area, began in the late 1970s and was completed and occupied by the BSE in 1980.
For this reason, the public market provided by the stock exchanges has been one of the most important funding sources for many capital intensive startups.
This shift in market expectations has led to an increased reliance on private equity and venture capital funding in the early stages of high-tech companies.
Though it is not as common, it still happens that highly speculative and financially unpredictable hi-tech startups are listed for the first time in a major stock exchange.
Additionally, there are smaller, specialized entry markets for these kind of companies with stock indexes tracking their performance (examples include the Alternext, CAC Small, SDAX, TecDAX).
When people draw their savings and invest in shares (through an initial public offering or the seasoned equity offering of an already listed company), it usually leads to rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to help companies' management boards finance their organizations.
By going public and listing on a stock exchange, companies gain access to a broader pool of investors, which can provide the necessary funds for expansion, research and development, and other growth initiatives.
Additionally, being listed on a stock exchange enhances a company's visibility and credibility, making it more attractive to potential partners, customers, and employees.
Thus, while not the primary purpose of stock exchanges, the opportunity for individuals to benefit from the success of businesses can be seen as a form of wealth redistribution within the financial markets.
In addition, publicly listed shares are subject to greater transparency so that investors can make informed decisions about a purchase.
The mismanagement of companies such as Pets.com (2000), Enron (2001), One.Tel (2001), Sunbeam Products (2001), Webvan (2001), Adelphia Communications Corporation (2002), MCI WorldCom (2002), Parmalat (2003), American International Group (2008), Bear Stearns (2008), Lehman Brothers (2008), General Motors (2009) and Satyam Computer Services (2009) all received plenty of media attention.
In the stock exchanges, shareholders of underperforming firms are often penalized by significant share price decline, and they tend as well to dismiss incompetent management teams.
Governments at various levels may decide to borrow money to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds.
Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth.
Additionally, the stock exchange's role in facilitating capital formation and investment in businesses also indirectly contributes to job creation and economic growth, making it a significant player in the employment landscape.
These regulations serve as a framework for corporate governance, financial transparency, and accountability, thereby ensuring that listed companies operate in a manner that is conducive to investor confidence and market stability.
By imposing these standards, stock exchanges contribute to the overall integrity and reliability of the financial markets, fostering an environment where companies are held accountable for their actions and decisions, ultimately benefiting both investors and the broader economy.
Another example is Tashkent Stock Exchange established in 1994, three years after the collapse of the Soviet Union, mainly state-owned but has a form of a public corporation (joint-stock company).
