Securities are a relatively recent entrant into the history of several thousands of years of trade and commerce. Until the seventeenth century, trade was conducted primarily between small groups of individuals. City-states and public-private partnerships raised capital through tariffs and taxes. Venetian moneylenders are considered to be the first group of businessmen that sold debt issues to other lenders and investors. Belgium opened an exchange in 1531 for the trading of promissory notes and bonds.
The sixteenth century also saw ocean-going trade routes opened between Europe, Asia, and North and South America, which led governments to issue licenses and grant monopolies to chartered companies that jealously guarded their interests and limited the benefits of their success to a small circle of owners. It was not until the early 1600s when the Dutch, in conjunction with the governing bodies in what was then known as the United Provinces, began to pool their resources and to share risks among larger groups of owners.
That process required careful management and negotiations among competing provinces, cities, and individual merchants. The key Dutch insight was that trade with Asia and the New World that was conducted through a single entity would be more profitable than any commerce conducted through multiple individual parts. With this philosophy, the Dutch established the East Indies Company and the West Indies Company, which today are perceived as the original world-class securitized multinational corporations.

The Dutch rapidly expanded their presence in the international markets in the 1600s while avoiding many of the military conflicts that tied up other European powers at the time. Those military confrontations forced governments to seek ways to raise capital to fund their armies. Sensing this demand, European debt markets expanded to enable those governments to raise immediate capital through government bonds that were secured by future tax revenues. Investors discovered that they could wager on the success of a government in these encounters and earn substantial profits if they correctly predicted the victors. In this environment, London and Amsterdam became global centers of sovereign debt financing, thus laying the additional groundwork for complex stock markets and public and private listings.
The securities issued by the East and West Indies Companies and other entities at that time had another appealing feature – shares were issued as paper certificates that could be bought and sold among investors. With no central exchanges, investors typically exchanged shares in person in private transactions and the underlying liquidity of the shares depended on investors’ abilities to identify buyers and sellers.
The first central exchange was established in London in 1773, followed a few years later by the Philadelphia and New York Exchanges in the newly-independent United States. Over the next 150 years, securities and the exchanges on which they were traded survived financial crashes and depressions, wars, and anarchist bombings and established themselves as the engine of international commerce. Laws and regulations enacted in the 1900s gave investors greater assurances of the safety of their investments and paved the way for explosive growth in the securities industries into the 21st century.