Question

Discuss the history of the U.S. Stock Markets, including trading and market movement. How can financial markets serve individuals and corporations in raising capital?

Answer 1

The history of U.S. stock markets can be traced back to the year 1792 when the NYSE (New York Stock Exchange) was founded. In 1792 24 stockbrokers laid the foundation of NYSE by signing the Buttonwood Agreement. The initial focus of NYSE was mainly on government bonds. With the passage of time trading activities and market movement expanded considerably for the NYSE. Throughout the 1800s The NYSE expanded beyond government bonds and bank stocks. Trading activities expanded on a continuous basis and markets grew in a linear manner.

Financial markets play a very important role with regards to raising capital; both for individuals as well as for corporations. Corporations can raise capital by issuing bonds (i.e. debt securities) and/or shares (equity). Thus through financial markets corporations are able to finance their business growth and their projects. Financial markets also enable both individuals and corporate entities to raise funds by providing them access to long term finance. Liquidity is improved for individuals because of presence of financial markets and individuals are able to sell the securities they hold quite easily.