The rapid development of trade back in the XVI century had contributed to the emergence of permanent, rather than temporary forms of wholesale trade, namely, auction and stock trading, thus auctions became the prototype of stock trading.
Today, all exchanges, depending on the specifics of trade and the level of their technological development, conduct their trading in the form of various types of auctions, ranging from simple auctions inherent in domestic stock trading and ending with a double form of voice auction and the system of electronic auctions characteristic of the modern developed exchanges of the world.
The stock market has become the highest form of organized market in the modern market economy. The stock market, incorporating the features of all previous forms of wholesale trade, serves to facilitate the trade process, to create a more efficient mechanism for the conclusion of trade agreements, as well as to protect the interests of both sellers and buyers from adverse price changes.
The modern stock market is the result of a long-term evolution from wholesale to organized forms of trade. Therefore, the process of formation of the stock market in developed countries has a centuries-long history, its development and its formation associated with the phased appearance of various forms of wholesale trade. The emergence of elements of the stock market began with the elementary local market (bazaar). In the vast majority of countries, local markets or bazaars can now be found, in particular, bazaars of food and consumer goods are common.
The next form of wholesale trade, which includes a significant part of the elements of stock trading, is a fair. In the Middle Ages, the trade fair was of great importance. The very meaning of the word “fair” in German is interpreted as “annual market”, which indicates the regularity of the bidding. In addition, fair trade forms were inherent in certain internal rules of bidding and ways to resolve conflict situations, such as stock exchange arbitration.
The global stock market has long been characterized by a concentration of stock activity in leading exchange centers that are geographically located in the countries of North America, Europe, South-East Asia. The role of American exchanges in the formation and development of the global stock market has been intensifying since the second half of the nineteenth century, with the creation of the Chicago Board of Trade and the introduction of trade in the first forwards and futures. US dominant position in the world’s stock exchange was also observed in the 60-70s of the last century, when the share of American exchanges in the world’s stock exchange accounted for more than 90%. The leading position in the global stock market in the US remained until the late 80’s, but in subsequent years, competition in the world stock exchange has contributed to the strengthening of the role of European and, since 2007, Asian stock and commodity exchanges. The share of the latter in the overall structure of the stock market in 2009 reached 35.06%, while the share of North American exchanges, where the US plays a leading role, fell to 35.9%.
The largest commodity exchange in the world today is the Chicago Mercantile Exchange CME Group, created as a result of the merger of the two oldest and most progressive US Commodity Exchanges in the United States in 2007, namely the Chicago Commodity Exchange (SWOT) and the Chicago Mercantile Exchange (SME). Consolidation of the two exchanges has allowed to expand the range of stock options and increase the liquidity of the American stock market. Today, this exchange allows traders to trade in grain (wheat, corn, oats), soybeans, oil, cattle, pigs, lumber, precious metals (gold, silver), foreign currency, treasury bills and US bonds, municipal bonds , stocks of shares and bonds, etc.Financial results of the Chicago Stock Exchange CME Group show a slight increase in revenues of the stock exchange in 2009 compared with the past by 2%. It is important to note that as a result of the creation of a stock exchange alliance CME Group has become a profitable organization, the total value of equity in 2009 amounted to 18.69 billion dollars USA. The cost of one share reached 12.44 dollars US and brought $ 4.6 US dividends. The next US stock exchange, which has entered the top ten, is the Chicago Board Options Exchange Chicago Exchange Options. The average annual volume of trades on this stock exchange in recent years varies within 1 billion contracts. This stock exchange mainly deals with options for 2200 shares, 22 stock indices and 140 asset funds. Clearing is carried out by the Chicago option clearing house. More than 95% of all trading on the stock exchange is electronically, which ensures its popularity among American and global investors.
The New York Mercantile Exchange (NYMEX) is considered one of the oldest global commodity exchanges. The New York Mercantile Exchange (NYMEX) has entered the second place among the commodity exchanges of the country in terms of the number of deals and volume of trade. This happened after its merger with Commodity Exchange Incorporated in 1994, the trading floor of which provides trade in the main types of industrial and precious metals. Today on the united exchange trade is conducted by 80 kinds of futures contracts and 32 kinds of options.
The world’s largest exchanges in Europe include the new EUREX exchange, which is also a stock exchange alliance established in 1998 on the basis of the German stock exchange Deutsche Börse AG and the Swiss stock exchange SIX Swiss Exchange. It is the formation of this exchange that served as the beginning of stock consolidation and the spread of global electronization of exchange trading technology. Almost from the very beginning of its creation, and by 2005, this market has taken a leading position in the global stock market by volume
concluded deals. Thus, in recent years, the annual volume of concluded transactions ranges from 2-3 billion transactions.
It should be noted that the main specialization of the exchange are contracts for government bonds of the German government, stock indices, stocks and instruments of financial engineering. According to experts, the most important part of success in such a rapid exit into the leaders of the world stock market is the the transition to electronic trading technology through the expenditure of the circle of participants. This circle ensures a high turnover and liquidity in the market, as well as a profitable form of organization of the exchange, allowing to constantly improve the technological basis of the exchange and to reduce the cost of participation in direct auctions for the bulk of the participants – speculators. In addition, the range of instruments of the exchange includes exclusively financial instruments, which today are the most liquid and popular tools not only speculation, but also source of investment.
Taking into account the tendencies of the development of the world stock market, the EUREX European Exchange today offers a wide range of derivatives at interest rates, securities, stock indices, dividends, volatility indices, asset price indices, loan derivatives, inflation derivatives, commodity derivatives, and weather derivatives. The organizational structure of the exchange also includes consolidated stock exchanges.
In 2007, EUREX was consolidated with the American Securities Exchange (ISE), and also with the BSP Regionalna Energetska Borza, the Slovenian exchange, which left a controlling interest of 51% and organized a joint trading platform for electricity and gas trade. The strengths of this stock exchange is its flexibility in development strategy; it can be considered one of the most promising exchanges in the world.
Another example of the stock consolidation was the creation in 2002 of the EURONEXT European Stock Exchange, which absorbed the London International Financial Futures Exchange (LIFFE), which immediately brought the stock exchange to the top three largest exchanges in the world. The London International Financial Futures Exchange was named in September 1982 (formerly known as the London Mercantile Exchange). The subject of turnover on this stock is agricultural products such as Robusta coffee, cocoa, white sugar and raw sugar, potatoes, oilseeds and sunflower oil (sunflower, soybean, coconut, rapeseed, peanut and flax), soy bean and rubber.
The London Stock Exchange, the first in Europe since 1987, has used the electronic system for commercial operations. On this exchange, after the equipment began to intensively trade in financial instruments, such as government securities, exchange rates, stock indices. The EURONEXT stock has been absorbed by several other European exchanges, including the French stock exchange MATIFF, Lisbon, Amsterdam Stock Exchange and others, and has become a powerful pan-European stock exchange for financial futures and options, which is now among the five global exchanges.
A significant event in the development of this exchange was its merger with the American stock exchange (New York Stock Exchange) in 2007, which ensured the emergence of another intercontinental alliance in the world stock market. At present, more than 8,000 different geographies and shares are listed on the stock exchange.
The NYSE-EURONEXT has an extensive organizational structure that includes various trading venues in the US and Europe – NYSE, NYSE Area NYSE Amex, NYSE Euronext and NYSE Alternext.
The London Metal Exchange, which is traditionally the main exchange market for non-ferrous metals, acts as a barometer of prices in world trade, is used for hedging, develops standard terms of exchange contracts, among them the world’s leading stock market.
The object of turnover on this exchange is copper, aluminum, zinc, lead, tin, nickel and silver, iron and plastic. Here there are both futures and forward transactions, and the share of the latter is very high. A significant part of the turnover consists of transactions of foreign counterparties, including Western European, American and Japanese, as well as
East European Daily quotation of these metals on the stock exchange is one of the most important factors of the world price accepted in international trade. The volume of trade in 2009 reached 111.9 million lots, which is equivalent to 4.71 trillion dollars. US $ 29 billion US average daily turnover on the stock exchange. It is important to note that over 95% of all transactions are international rather than the domestic market, which provides the international exchange market with an international status in the metals market and financial stock instruments. In April 2010, the stock exchange first opened its presence abroad in Singapore, the main factor contributing to this is that% of the stock exchange has brokerage offices in Singapore.