History of modern stock trading dates back to the 18th century. Earlier there were one or two stock exchanges, which were heavily banked on for trading of stocks. As time passed, new concepts and new methods of trading were incorporated. The article below indicates the same facts.
History of modern stock trading( until the latter half of the 20th century) may be traced back to the 18th century, when the American Stock Exchange, which was earlier known as the Curb exchange and the NYSE or New York Stock Exchange were dominant in the stock trading market.
Earlier, there was a practice (approximately for the last 200 years) where the traders, comprising of the buyers as well as the sellers used to meet to carry out various transactions pertaining to the stocks.
The first stock market to function electronically:
In the year 1971, the OTC or over-the-counter market was included in the NASDAQ or National Association of Securities Dealers Automated Quotation listings. The NASDAQ was the first stock market to operate electronically. Thereafter, it was observed that stock-trading system in majority of the nations became a “fragmented” activity as compared to a highly centralized system.
It was observed that during the 1960s as well as the 1970s, that institutional trading gathered momentum. This in turn necessitated lower costs of trading. There was an increasing number of traders who were working for large institutions and those who preferred to operate “off the floor” of New York Stock Exchange. It was also observed during the same period that brokerage bodies replaced floor trades.
Pools of liquidity:
In the year 1975, the SEC or the Securities Exchange Commission eradicated fixed commissions. The SEC also amended any norm, which was proving to be a burden pertaining to the securities market competitions. Over the years, several changes have set in. For instance, “crossing networks” have become prominent. A concept of “dark pools” has also made their appearance in the stock markets. The “Dark pools” may be referred to as “private pools of liquidity”, which are latent. The dark pools serve as a platforms or sites of transaction, where the traders (comprising the buyers as well as the sellers) are able to carry out trade without disclosing the intentions of trade.