Amsterdam stock exchange

Amsterdam can be credited as the birthplace of the stock market. The city was once the global center for finance, a title that currently belongs to New York. The Amsterdam exchange is established as a trading center for the issuance of shares of a newly formed joint stock company, the Dutch East India Company or the Vereenigde Oost-Indische Compagnie. The Dutch East India Company first conducted its operations in the islands of Maluku in South East Asia. The company primarily acquires spices in this region.

For businesses to raise capital funds for a venture during this era, they always turn to debtors through the issuance of bonds. Since the nature of acquiring commodities from a foreign land is very risky, debtors are reluctant to lend money because there is a high probability that the enterprise won’t be able to pay the debt back should the venture fail. Factors such as unpredictable weather or piracy all add up to the uncertainty debtors are faced when making a decision. The formation of the Joint Stock Company allows the entire bulk of the company to be sold in fragments to interested parties. For the buyers or so called investors of these shares, instead of receiving an interest payment, shareholders are entitled to a share of the profits made by the company after a certain amount of time has passed. At that time, shareholders won’t be able to receive regular profit share payments or dividends until the tenth year from when the shares were first issued. To increase public interest on the issues of company ownership, each share can be sold to another party as long as the price is attractive enough to find buyers for it. The Dutch East India Company needed a central market to conduct the buying and sharing of their stocks as well as a place where new share issues would be sold. This central market was the Amsterdam stock exchange established by none other than the Dutch East India Company at the same year of its incorporation in 1602. The exchange primarily traded only VOC shares (Vereenigde Oost-Indische Compagnie or Dutch East India Company) after which, other joint stock companies started offering shares to the Dutch public in this exchange.

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