Stocks

History of the Stock Certificate

Stock certificates are a legal document that represent ownership of shares in a corporation. A certificate confirms the number of shares owned, and the according share of a company. The first stock certificates were created in the early 1600s as a way to group in many investors into a project. Essentially the first corporations, stock certificates were given to investors who put their money into the group investment capital. Many of the first experimental companies were created with the goal of using the investment capital to build bridges and roads. With the growth of financial markets, the privileges and rights granted to certificate holders has changed some over the years.

The Dutch East India Company is the very first case where stock certificates were issued and utilized to represent an ownership in the company. In 1602, the States-General of the Netherlands issued a royal charter to found the Dutch East India Company. The Dutch East India Company issued paper stock to its investors in 1606. Investors in the Dutch East India company were issued paper certificates as proof of their share ownership.. This is the first recorded instance of stock certificates issued to investors. The investors and were able to trade their shares on the original Amsterdam stock exchange, another great advance in the history of financial markets.

After the revolutionary invention of Dutch East India Company the stock certificate as a currency for share ownership started to grow. By the late 18th century, trading stock certificates as a means to exchange ownership in companies was growing exponentially. By then there were three types of certificates being used: bonds, which were certificates representing investment in governmental debt; bank stock; and company stock. In 1792 the New York Stock Exchange was created to meet the large demand that investors had for a centralized trading locale. The NYSE brought greater transparency in pricing and liquidity to investors.

The growth of financial markets from this point has been widely documented. The NYSE has grown from being a local exchange under a tree to the worlds largest financial trading floor. Billions are exchanged every day. The growth of the stock exchanges was a by-product of the United States’ industrialization. Railroad companies issued certificates of stock for which there was enormous demand in the 1830s. This catapulted the stock market activities to the center stage of American life. The financial industry from the 1830’s on would form America’s innovation and entrepreneurial spirit.

Though America’s economic expansion the stock certificate was a national symbol. It symbolized for America it’s common achievement in creating a greater place. The certificates themselves very often did and still do have eagles and flags imprinted on them. With the exponential of America’s economy, all industries have benefited from capital investment from investors through the invention such as: the aerospace industry, the mining industry, the railroad industry, the telecommunications industry among so many others. The paper stock certificates is now a sight uncommonly seen in stock broker’s offices, it is a diminishing invention. It’s replacement are electronic alternatives that represent share ownership that offer added convenience, ease and cost effectiveness that there paper counterparts.

Despite it’s demise interest in paper certificates among many remains considerable. Scripophily, the hobby of collecting old certificates, as grown in the past years. Today paper stocks are considered valuable both historically and as collectibles, but in most cases they are inconvenient in modern times. It is quite apparent that the stock certificate was an tremendous innovation and has influenced financial markets and the world in so many ways.

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