In the most general sense the stock market is a financing vehicle for companies and an income generating or wealth accumulating vehicle for investors. Companies once had only debt instruments and other letters of credit as methods to cover growth plans. When these techniques no longer provided enough capital to fuel the growth of business, companies moved to partnerships and eventually public ownership to cover long term expansion plans.

In its infancy public ownership of companies had its issues because the markets lacked liquidity or the ability to match willing buyers and sellers. Share prices were not uniform or efficiently traded because it involved brokers and other middlemen to find willing participants to transact the transfer of company shares. In the era before the standardized and regulated stock market, the ability to monetize paper profits was a inelegant affair resulting in unfair practices and significant transaction costs. Not unlike present day transactions for privately held real estate, buying and selling shares of corporate America resulted in a highly negotiated and time consuming affair.

The expansion in the use of equity as a financing vehicle and the interest in company ownership necessitated the creation of clearing houses for the transaction of collateralized securities. These clearing houses were the precursors of the modern stock exchange that now guarantee a quick and fair execution of buy and sell orders.

The modern day expansion of the stock market is involved with the specialization of the exchanges and a separation of securities between business type and collateral. With the formation of commodities, currency, and futures exchanges collateral specific experts facilitate the exchange of specialized securities and investment vehicles. On the equity front, exchanges such as the NASDAQ have emerged as a fully automated transaction platform for technology oriented equities.

The following pages provide more in-depth analysis and information on the history and formation of the better known stock exchanges?.

History of the Stock Market - Articles By Better Trades