A brief history of the Dutch stock exchange
The Netherlands has been characterized as the “first modern economy in the world”. And for good reason. In the early 17th century, essential components of today’s Western economic model emerged in the Netherlands. This is also true of stock trading: both the stock market and the related idea of financing companies through the stock market are 17th-century Dutch discoveries.
Since the 17th century, origins have proven to be a lead. In the digital age of the 21st century, the Netherlands – number 133 in the world in terms of surface area – still ranks among the world’s top securities companies and boasts an extraordinarily rich stock market history.
Over 400 years of Dutch stock market history can be told in a variety of ways. Elsewhere on this site, this has been done on the basis of special moments. In this spot, we walk through it in four major steps.
Cradle of the stock market (from about 1600)
The leading role in Dutch stock exchange history belongs to the Verenigde Oost-Indische Compagnie (VOC). It was the first company to go public in 1602 and thus founded the first stock exchange: the Amsterdam Stock Exchange. The initial public offering is not an isolated event. It was preceded by a significant other innovation: the invention of the modern company, the limited liability company, by that same VOC.
Stock Market Capitalism
The West-Indische Compagnie (WIC) followed the example of the VOC and became the second company to be listed on the stock exchange in 1623. And domestic governments also soon discovered the stock market and placed loans there. An early form of stock market capitalism emerges in the Netherlands, where it becomes common for companies and governments to appeal – albeit still on a limited scale – to the investing public. And with success, because the public’s willingness to invest is high. Although there is also a securities trade in Rotterdam in the 17th century, it takes on a large scale especially in Amsterdam. So large, in fact, that in the early 17th century the municipal government in the capital saw reason to better facilitate trade. Amsterdam will have an Exchange Bank, which will make handling stock market transactions much easier. And there will be a Merchant’s Exchange, the Hendrick de Keyser Exchange, which will provide a regulated meeting place for merchants. That the Netherlands, and Amsterdam in particular, grew into a world center of trade and capital in the 17th century is largely due to these two institutions.
Water as an origin
Why exactly does the Republiek der Zeven Verenigde Nederlanden (Repubic of the Seven United Provinces), as the Netherlands was officially called at the time, become the cradle of the stock market? That is a question that is still being speculated about by experts to this day. The Calvinist – focused on frugality and reliability – Dutch national character is often pointed out. More striking and distinctive is the statement that it would have to do with Holland’s eternal struggle against the water. With the constant threat of the country flooding, the Dutch have been used to working together for centuries and using collective savings to prevent floods. This would have provided a perfect breeding ground, the reasoning goes, for what stock market capitalism is in its origins: you achieve more by working together and spreading risks. The fact that the oldest known interest-bearing loan in the world is an interest letter from a Dutch water board dating from 1624 may be called indicative in this context.
The emergence of stock market capitalism in the Netherlands does not go unnoticed in surrounding countries. In 1659, London was also given a stock exchange, following Amsterdam’s example. Many other countries followed gradually thereafter. A wonderful anecdote in this regard comes from the disaster year of 1672. The Netherlands is at war with France and England and persuades the German Emperor Leopold I to support the Netherlands in exchange for receiving Dutch government bonds. The emperor gets a lesson in the workings of the stock market on the upside. He finds out that the price of his bonds drops or rises according to his success on the battlefield. In addition to the clever trading spirit, this illustrates that (the knowledge about) Dutch stock market capitalism is on the rise in Europe.
The 17th century, the Golden Age, was a period of unprecedented economic prosperity in the Netherlands thanks in part to the rise of stock market trading. Quite soon, however, it also becomes clear that the Dutch discovery of the stock has a downside. Shortly after the VOC went public, the first regulations were needed to counteract excesses in the form of price manipulation and wild speculation. Yet a real stock market crisis in this early period remains absent and moments of prosperity dominate in the 17th century.
Financier of the world (from about 1700)
From merchant to banker
The Golden Age brings great wealth. When the Netherlands gradually had to relinquish its position as the center of world trade in the 18th century, an entirely new role resulted: that of financier of the world. Many European monarchs and countries looking for money like to take advantage of the wealth of the Netherlands and place government bonds on the Amsterdam stock exchange. In the process, merchants emerged as bankers for their trading relationships abroad. Austria was first in line in 1695. Other European countries such as Spain, Russia, Sweden, France and England will soon follow. Also during this period, the shares of some English companies, such as the East India Company and the Bank of England, come to be listed on the Amsterdam Stock Exchange.
In a short time, Dutch capital penetrated every corner of Europe, while from the end of the 18th century it also found its way to America. The fact that in the 21st century the Netherlands is still among the world’s top countries when it comes to foreign investment has its roots here.
Criticism of capital exports
Like today, large capital exports were not entirely uncontroversial in the 18th and 19th centuries. It regularly leads to criticism in the States of Holland and the question of whether it should not be restricted. However, this was without result. To have enough good investment options left over, investors simply cannot do without foreign countries, is the defense. And this is not entirely unjustified, because due to the trade monopolies of the VOC and the WIC, domestic supply was indeed still limited at that time. At the same time, those who argue today that it was precisely because of this that the industrial revolution in the Netherlands (read: the arrival of more domestic companies on the stock exchange) got off to a late start have a point. Perhaps an interesting fact for today’s policy makers.
The first stock market crisis
The many foreign investments make the Netherlands economically vulnerable. In 1720, this leads to the first stock market crisis. The Netherlands, following the example of France and England, briefly became enthralled with private companies that, in retrospect, often turned out to be nothing more than “wind companies. Adequate intervention by the authorities in Amsterdam ensures that the impact of the first crisis in the Netherlands is limited. This is in contrast to England and France, where it leads to lasting economic dislocation.
The first mutual fund
A second crisis that came over from England around 1773 caused greater damage and resulted in a series of bankruptcies in financial Amsterdam. But there is also a positive side to this story. Indeed, there is a growing awareness of the importance of spreading risk. This leads to a new Dutch world first in 1774: the creation of the first investment fund.
The first scholarship organization
The first mutual fund will not be a success. This has everything to do with the turmoil in Europe and the Netherlands at the end of the 18th century. The French Revolution creates tensions and to make matters worse, a naval war with England brings trade to a complete halt. The VOC does not survive this. In 1799, after nearly 200 years, its existence came to an end. It is not entirely coincidental that the Collegie tot Nut des Obligatiehandels, the first stock exchange organization in Amsterdam, came into being precisely in these turbulent and uncertain times.
that starts publishing prices on a fixed basis.
Doubts about scholarship
The demise of the VOC and the French Period (1795-1813) set the stage for a period of economic decline in the first half of the 19th century. In particular, trading restrictions during the French Period affected the stock market. The number of stock market listings in Amsterdam is declining and the Netherlands is losing its undisputed leadership as the world’s financier. When Hendrick de Keyser’s Stock Exchange was forced to close its doors in 1835 due to continuing subsidence, the question even arose as to whether Amsterdam still needed a new stock exchange building. There is also discord within the Amsterdam stock market and a competing organisation is founded.
second stock exchange organization
The New Trade Society.
All this may be called symbolic of the not very rosy situation in which stock market trading and the Dutch economy found themselves at that time. The French Period left deep marks. The Netherlands was saddled with an enormous debt and, moreover, had to – after the definitive end of the Republic – start all over again as a Kingdom.
Stock exchange of the Netherlands (from about 1850)
Around 1840, the economic situation at one point is so bad that even a bankruptcy of the Netherlands is threatened. But the Amsterdam stock market is bringing relief. By refinancing the huge national debt at a lower interest rate through the stock market, the government manages to avoid this. This lays the foundation for a period of economic boom, starting in the second half of the 19th century.
Scholarship of Zocher
The raised doubts about the importance of the stock market are also disappearing. After the Amsterdam merchants had to make do with an emergency building for ten years, in 1845 they finally got their long-desired new stock exchange building: the Beurs van Zocher. Just as in Hendrick de Keyser’s Beurs earlier, the trade in securities was still taking place among the trade in goods. But securities trading is on a strong upswing, gradually growing into the most important branch of trade. For the securities dealers, this is reason to start working for better accommodation and regulation of their profession. In order to act forcefully in this regard, they joined forces in 1876 to form the Securities Trading Association.
Second Golden Age
The rise of stock trading has everything to do with the large influx of funds on the Amsterdam stock exchange. Especially in the last quarter of the 19th century, growth was tremendous. At first, these were mainly
, but from about 1890 the number of Dutch and Dutch-Indian funds also increases significantly. The increase in domestic funds is related to the Industrial Revolution and the emerging business community in the Netherlands. The increase in the number of ‘colonial’ funds resulted from a government measure to leave more room for private initiative in the Dutch East Indies. As a result, between 1865 and 1900 the number of stock exchange funds in Amsterdam jumped more than eight times and by the turn of the century reached about a thousand. Not for nothing is this period also called the Second Golden Age.
Stock Exchange Square 5
After a protracted discussion, the Securities Trading Association also achieved its first success in 1903 in its fight for a better home. In the
Beurs van Berlage
, the stockbroking industry was given its own trading floor for the first time. But this is only an intermediate step. The stock exchange continues to grow and therefore moves at the end of 1913 to a brand new building of its own on
. The Stock Exchange Association finally has what it wants: its own stock exchange building as a basic prerequisite for the healthy development of the stock exchange.
The new premises seem to be working wonders. As early as 1914, two special milestones immediately present themselves. The number of Dutch corporate funds exceeds the number of government funds for the first time. And the total number of domestic funds exceeded the number of foreign funds for the first time. Although its role as a financing institution for foreign countries is certainly not over, the Amsterdam Stock Exchange is thus gradually acquiring the function of ‘Stock Exchange of the Netherlands’. And by extension, during the course of the 20th century, the Securities Trading Association grew to become the stock market authority of the Netherlands.
End of flowering
At short intervals, the Second Golden Age continued until about 1930. Successively the
stock market crash of 1929
The crisis of the 1930s, the
Second World War
and decolonization (“India lost, disaster born“) then put an end to the period of growth and optimism. Shortly after the war, the popularity of the stock market reached a low point. And not for the first time in history, doubts about the social and economic importance of the stock market are also arising.
Scaling and digitization (from about 1955)
In order to bring the stock exchange back to the positive attention of investors and the business community, the stock exchange, under the motto “The prosperity of our country is greatly benefited by a well-functioning stock exchange apparatus,” launched in 1955 a
. The promotion is paying off: the number of private investors and stock market turnover are increasing again after some time. And thanks to the contribution made to the financing of reconstruction, faith in the stock market is also gradually returning.
This does not alter the fact that the Amsterdam stock exchange – both nationally and internationally – has clearly lost ground. The choice is therefore made to innovate and scale up. A first step in the early 1970s was to ‘merge’, for reasons of efficiency, the small exchanges of
with the Amsterdam stock exchange. Efficiency is also the goal of a second step being taken: the establishment of a
for securities in the Netherlands.
A notable third step was the establishment in 1978 of the first
in Europe. The underlying idea is that the options exchange can stimulate the faltering turnover figures that the stock market is currently facing. The new fair will have its own floor in the Beurs van Berlage. The first few years are difficult. Investors seem to be waiting and on top of that the economy is not in good shape. In the early 1980s, a turnaround occurred. The economy is picking up and, after much promotion, the public is beginning to understand and appreciate the options product more and more.
The upswing in the economy is causing options trading to become hugely popular in a short period of time. The floor in the Beurs van Berlage cannot handle the increasing crowds. The options exchange therefore moved into larger premises at 65 Rokin in 1987, which soon became too small due to its continuing growth. But it’s not just options trading that’s growing stormy. Turnovers are also rising exuberantly within the stock market.
Strong growth is changing the character of securities and options trading: it is becoming increasingly international. In order to continue to operate strongly within the new international playing field, the stock and options exchanges join forces in 1997 to form a single national exchange:
Amsterdam Exchanges NV
. Since this is the first time that a profit driven public company is involved, this means that the
on the stock market, which traditionally lay with the stock exchange associations, will at this stage definitively fall to independent supervisors.
The stock exchange had already switched to screen trading at the time of the merger. The merger therefore offers a solution to the space problem facing the options exchange on the Rokin. In 1998, options trading takes over the large exhibition hall at Beursplein 5 from securities trading. But the options exchange also opts for automation and in 2002 floor trading in Amsterdam comes to a definitive end.
The shouting and busy gesticulating traders in garish jackets disappear from the floor. Taking their place are traders who participate in international stock market trading in relative silence behind computers. It is typical of the strong Dutch stock market tradition that some small options houses that started on the Amsterdam options exchange (Optiver, IMC) have grown in the 21st century into world players within global computer trading.
It is not only the character of commerce that is changing with the advent of computers. The Dutch stock market landscape will also look very different. Automation paves the way for
: electronic trading platforms from home and abroad that compete on price and in a short time become competitors of the Amsterdam stock exchange.
To stand firmly within the new digital and international playing field, Amsterdam Exchanges already merged with the Brussels and Paris exchanges in 2000 to form
. In 2002, the Lisbon Stock Exchange and the London derivatives exchange LIFFE also join this first cross-border exchange in Europe. Following a merger of Euronext with the New York Stock Exchange, the Amsterdam Stock Exchange became part of NYSE Euronext between 2007 and 2014. After an acquisition and subsequent split of this transatlantic exchange group, Euronext has been standing on its own two feet again since 2014. Recently, the Dublin (2018), Oslo (2019) and Milan (2021) stock exchanges also joined Euronext.
Whether the “international train” has reached its final destination with this is questionable. Still sounds about mergers and the importance of economies of scale. There are also critical voices. This is not so much about the importance of international mergers. This importance is widely recognized in view of the advancing globalization and digitalization. The main question is whether, in an international stock market environment, the Amsterdam Stock Exchange will be able to sufficiently fulfil its familiar function as financier of Dutch business.
Certainly now that the banks are gradually withdrawing as financiers of business, there are still great opportunities there for the Dutch stock exchange sector, more than 400 years after the first IPO of the VOC.