History of the Stock Broker
Stock brokers are licensed agents who provide counsel on what and when to purchase and whether to hold or sell securities. Brokers also execute buy-sell orders on the investor's behalf, taking a percentage of the transaction as compensation.
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Beginnings
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The first stock brokers were the Real Merchants of Venice in the 1300s who were money lenders, debt traders, and purchasers of government debt. These Venetians were the first group to buy and sell government securities for profit. Much like modern brokers, they met clients with slates containing various governmental issues available for purchase.
East India Trading Companies
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The French, English, and Dutch governments all signed charters for East India trading companies during the 1600s. These companies changed the business model in that they offered investors the opportunity to purchase stocks paying dividends on all trading voyages made by the company rather than by individual voyages. As there were no formal stock exchanges, investors had to track down brokers to buy in.
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American Stock Exchange
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In 1790, the first finacial securities were created in the United States when the federal government issued $80 million in bonds to pay for its Revolutionary War debt. Two years later, 24 of the most prominent stock brokers met to sign the Buttonwood Agreement, agreeing to trade securities for commission.
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References
- Photo Credit flag image by Valeri from Fotolia.com
