Forex glossary of terms
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Stock exchanges were born in the 15th century in Burgundys main trading centers of the north, now Belgium. They were called bourses, from the Latin bursa or pursethree of which were on the crest of the Van der Beurse, a family of financiers in Bruges.
The Beurse mansion was a popular meeting place for Italian bankers who traded bills of exchange. Invented by Francesco Datini, a 14th-century Italian merchant, the bill of exchange was an essential instrument for banking and international trade as it covered both the lending and transfer of funds in different currencies between Europes main trading centers. Although it amounted to credit, the bill of exchange did not bear interest rates, hidden in exchange rates, thus allowing bankers to get around the Churchs ban on usury.
The first liquid financial instrument, the bill of exchange was instrumental in creating the first security marketcomplete with gold fixingin the Beurse mansion as early as 1409. Bruges, therefore, earned the title of the city hosting the first organized market.
North Italian bankers, including the Medici, dominated lending and trade financing throughout Europe and brought the bills of exchange to all major trading centers, usually harbors or cities hosting trade fairs. These bankers were known as Lombards, a name that was synonymous with Italians in the Middle Ages, in reference to the 36 duchies then ruled by the Longobards. They were so influential that, to this day, many financial centers of Europe have streets named after them.
Bruges role as a leading international trade center relied on its access to the sea via the Zwyn canal. But silt eventually closed Bruges harbor and the city lost its economic prominence to the port of Antwerp, where merchants ran an exchange in 1460. In turn, when Antwerps role declined amid political turmoil, Amsterdamwhere the first stocks were traded as opposed to securitiesemerged as the new financial center of the 16th century, soon followed by London and Lyons.
The Amsterdam Stock Exchange, created in 1602, became the first official stock exchange when it began trading shares of the Dutch East India Company. These were the first company shares ever issued.
By the early 1700s there were fully operational stock exchanges in France and England, and America followed in the later part of the century. Stock exchanges became an important way for companies to raise capital for investment, while also offering investors the opportunity to share in company profits. The early days of the stock exchange experienced many scandals and stock crashes, as there was little to no regulation and almost anyone was allowed to participate in the exchange.
Major world exchange markets:
Today, stock exchanges operate around the world, and they have become highly regulated institutions. Investors wanting to buy and sell stocks must do so through a stock broker, who pays to own a seat on the exchange. Companies with stocks traded on an exchange are said to be 'listed' and they must meet specific criteria, which varies across exchanges. Most stock exchanges began as floor exchanges, where traders made deals face-to-face. The largest stock exchange in the world, the New York Stock Exchange, continues to operate this way, but most of the world's exchanges have now become fully electronic.
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