In 12th-century France, the courtiers de change were concerned with managing and regulating the debts

of agricultural communities on behalf of the banks. Because these men also traded with debts, they
could be called the first brokers. The Italian historian Lodovico Guicciardini described how, in late 13th-
century Bruges, commodity traders gathered outdoors at a market square containing an inn owned by a
family called Van der Beurze, and in 1409 they became the "Brugse Beurse", institutionalizing what had
been, until then, an informal meeting.[18] The idea quickly spread around Flanders and neighboring
countries and "Beurzen" soon opened in Ghent and Rotterdam. International traders, and specially the
Italian bankers, present in Bruges since the early 13th-century, took back the word in their countries to
define the place for stock market exchange: first the Italians (Borsa), but soon also the French (Bourse),
the Germans (börse), Russians (birža), Czechs (burza), Swedes (börs), Danes and Norwegians (børs). In
most languages the word coincides with that for money bag, dating back to the Latin bursa, from which
obviously also derives the name of the Van der Beurse family. In the middle of the 13th century,
Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed
spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and
Florence also began trading in government securities during the 14th century. This was only possible
because these were independent city-states not ruled by a duke but a council of influential citizens.
Italian companies were also the first to issue shares. Companies in England and the Low Countries
followed in the 16th century. Around this time, a joint stock company—one whose stock is owned jointly
by the shareholders—emerged and became important for colonization of what Europeans called the
"New World".[19]

One of the oldest known stock certificates, issued by the VOC chamber of Enkhuizen, dated 9 Sep 1606.

Courtyard of the Amsterdam Stock Exchange (Beurs van Hendrick de Keyser) by Emanuel de Witte, 1653.

The Dutch East India Company (founded in 1602) was the first joint-stock company to get a fixed capital
stock and as a result, continuous trade in company stock occurred on the Amsterdam Exchange. Soon
thereafter, a lively trade in various derivatives, among which options and repos, emerged on the
Amsterdam market. Dutch traders also pioneered short selling – a practice which was banned by the
Dutch authorities as early as 1610.[20]

Crowd gathering on Wall Street (New York City) after the 1929 crash, one of the worst stock market
crashes in history.

There are now stock markets in virtually every developed and most developing economies, with the
world's largest markets being in the United States, United Kingdom, Japan, India, China, Canada,
Germany (Frankfurt Stock Exchange), France, South Korea and the Netherlands.[21]
Importance

Even in the days before perestroika, socialism was never a monolith. Within the Communist countries,
the spectrum of socialism ranged from the quasi-market, quasi-syndicalist system of Yugoslavia to the
centralized totalitarianism of neighboring Albania. One time I asked Professor von Mises, the great
expert on the economics of socialism, at what point on this spectrum of statism would he designate a
country as "socialist" or not. At that time, I wasn't sure that any definite criterion existed to make that
sort of clear-cut judgment. And so I was pleasantly surprised at the clarity and decisiveness of Mises's
answer. "A stock market," he answered promptly. "A stock market is crucial to the existence of
capitalism and private property. For it means that there is a functioning market in the exchange of
private titles to the means of production. There can be no genuine private ownership of capital without
a stock market: there can be no true socialism if such a market is allowed to exist."

— Murray Rothbard, in “Making Economic Sense” (2006)[22]

Function and purpose

The stock market is one of the most important ways for companies to raise money, along with debt
markets which are generally more imposing but do not trade publicly.[23] This allows businesses to be
publicly traded, and raise additional financial capital for expansion by selling shares of ownership of the
company in a public market. The liquidity that an exchange affords the investors enables their holders to
quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other
less liquid investments such as property and other immoveable assets.

History has shown that the price of stocks and other assets is an important part of the dynamics of
economic activity, and can influence or be an indicator of social mood. An economy where the stock
market is on the rise is considered to be an up-and-coming economy. The stock market is often
considered the primary indicator of a country's economic strength and development.[24]

Rising share prices, for instance, tend to be associated with increased business investment and vice
versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks
tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth
operation of financial system functions. Financial stability is the raison d'être of central banks.[25]

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the
shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer
or seller that the counterparty could default on the transaction.[26]

The smooth functioning of all these activities facilitates economic growth in that lower costs and
enterprise risks promote the production of goods and services as well as possibly employment. In this
way the financial system is assumed to contribute to increased prosperity, although some controversy
exists as to whether the optimal financial system is bank-based or market-based.[27]

Recent events such as the Global Financial Crisis have prompted a heightened degree of scrutiny of the
impact of the structure of stock markets[28][29] (called market microstructure), in particular to the
stability of the financial system and the transmission of systemic risk.[30]