CHANGES IN THE FUNCTIONING AND ROLES OF INTERNATIONAL STOCK MARKETS
This research reviews changes in the functioning and roles of international stock markets. The New York Stock Exchange serves as the vehicle to discuss North American stock markets, while the London Stock Exchange fulfills a similar role for European stock markets. A greater number of Asian exchanges are included in this research because of the significant growth in stock market activity in that region over the past decade. The functioning of stock markets is considered in terms of both structure and technological innovation. The roles of international stock markets are considered in the context of their relevance to global trading of equity stocks.
The world's first stock market crash occurred in London before a formal stock market was ever established. The English South Sea Company was established in 1711, on the basis of an assumption of an eventual English monopoly on European trade with Pacific and South American countries. The British government, as a part of an effort to fund its national debt, promoted public confidence in the English South Sea Company and encouraged holders of state annuities to exchange them for shares in the company. The anticipated English trading monopoly did not materialize, and the value of the shares in the English South Sea Company crashed in 1720, becoming known as the South Sea Bubble. Many investors were ruined financially, and the entire system of chartered limited liabilities was thrown into disrepute.
Decades were required to restore public faith in investment in limited liability companies. Eventually, however, informal trading in company shares were renewed in the coffee houses in the City of London, the financial and trading center located within metropolitan London. In 1773, the world's first formal stock market was established with the formation of the British Stock Exchang...