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Working Lunch Thursday, 20 February, 2003, 12:30 GMT
Trading places
We buy and sell shares at the click of a mouse these days.

They enable businesses to grow and investors to prosper.

But how did shares come about?

It started way back in the 16th century when Sebastian Cabot wanted to start trading with Ivan the Terrible of Russia but didn't have enough cash.

Pioneer

He sold shares in the business for 25 each, promising to repay shareholders with any profits he made.

Cabot Square is named after the founder of share trading
In more ways than one, his Russia Company was something of a pioneer. He used the money to pay for the ships to carry the merchandise.

Similar ventures followed, such as the Africa Company in 1553 and the East India Company in 1600, bringing silks and spices back to the UK.

Sebastian Cabot, who was something of an explorer as well as a trailblazing businessman, is commemorated in the heart of London's new commercial district, Docklands, where a square bears his name.

SOURCE OF THE BOURSE
Why are many European exchanges known as Bourses?
Some of first traders in the world gathered outside the house of the Van der Beurse family in Bruges (above) in the 12th century.
The family became associated with trading, and a bourse came to signify a stock exchange.

By the late 17th century, shares were becoming so widespread that traders needed somewhere to meet to do business.

They initially set up shop on the floor of the Royal Exchange in London, which was used for many types of trading.

But these early stockbrokers weren't too popular.

They were accused of leading people into debt and were also considered rather too boisterous.

So they were thrown out, and had to find a new home.

Atmosphere

This turned out to be Jonathan's Coffee House in Change Alley.

Plaque commemorating Jonathan's Coffee House
The traders moved to coffee houses
"The atmosphere in the coffee houses was very much the atmosphere of the gentlemen's clubs," says stock exchange historian Elizabeth Hennessy.

"There was coffee drinking, there was a certain amount of wine, food was provided.

"I think it was a very lively scene, except when the market was flat when it would have been quieter and more deserted."

Coffee houses were important in establishing other businesses, such as insurance.

Dedicated

But they became such popular places to trade shares that brokers had to find somewhere bigger, and left to set up their own dedicated stock exchange.

City dealer
The modern face of trading
For many years, the system known as open outcry continued unchanged, with traders shouting orders and waving papers across the floor.

In some exchanges, such as the International Financial Futures and Options Exchange (Liffe), traders became well-known for the multi-coloured jackets that signified the firm they worked for.

Now, of course, computers have taken over.

Starting with Big Bang in 1986, the various exchanges have gradually shifted to screen-based trading.

It might lack the glamour of bygone days, but today's stock exchanges are at least more efficient and cheaper for large and small traders alike.

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