The History of Stock Brokerage Firms

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Stock brokerage firms began back in the 11th century with French and Chinese trading markets. Early American stock brokerage firms were started by companies like Merrill Lynch, Smith Barney and Morgan Stanley. Find out how the development of discount brokerages changed the face of investing with information from a financial analyst in this free video on the stock brokerages.

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Video Transcript

Hi this is Roger Groh with Groh Asset. Today we're here to talk about the history of stock brokerage firms. Well from what I can tell, in the very beginning the French during the 11th century began to regulate part of the banking and trading markets. Now at that same time or prior in all likelihood, the Chinese probably did the same. So we're not trying to leave the Chinese out of the equation in this. In 1602, the Dutch East India company setup a regulated system of their own and became a brokerage firm. Now they traded a number of different things, commodities for one, sort of like the way that we do now, but I think with them it was more ships bringing spices physically and then selling them and furs and things like that. Early firms in the Unites States include Alex Brown which is now a division of Deutsche Bank. Other firms that are old that are still around, well certainly Merrill Lynch has been around for many years. Also take a look at Sutro if you want to know a little bit about the development of the west. And last but not least, the biggest and maybe most interesting to look at would be Citicorp. Now you wouldn't think that but if you're part of Smith Barney, you really are part of the history of the United States. Whether your account is at Morgan Stanley or Smith Barney or part of RBC, you really represent an awful lot of the 200 plus years of history in the United States. If you go back to their websites, they'll gladly tell you where they've come from in terms of the history of their firms. During 1974 though, an event happened that dramatically changed the brokerage business and that was the development of the discount broker and the day that the brokers who were there then still talk about it was big bang. The reason is that no longer were commissions fixed. And as a result, firms like Fidelity and Charles Schwab and White Pacific Securities and ScotTrade and all of the other discount brokers that you have come to know and love were able to operate and offered a significantly different product than the full service firms. It really did dramatically change the nature of the business. For better or for worse, well I'll leave that up to you. Well that's a little bit about history of stoker brokerage firms. Oh maybe one other note, stock brokerage firms have existed in many countries, not just here in the United States. For instance, today in China where they have the most modern stock trading system, modeled after the NASDAQ in a glorious and very glitzy building full of computers and fast equipment, until very recently shares were actually traded on the curb. Something that I saw the first times when I visited China. Well that's a little bit about history. I hope it helps and thank you very much for spending time with me, I'm Roger Groh.


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