History of Securities Transaction Costs
Securities transaction costs refer to the fees associated with the purchase and sale of stocks and bonds in the stock market. These costs were first documented in ancient Rome. At the time, wealthy landowners recorded the costs associated with their transactions as a form of proof that they had to pay the tax associated with them. Later, this became a part of the Roman law code, making it more widely accepted throughout the empire.
In the middle ages, the concept of securities transaction costs evolved again. In particular, the rise of trading in guilds saw the introduction of fees charged for certain transactions. For example, members of the London Stock Exchange had to pay a premium on certain transactions. This was an extension of legal requirements, as the Stock Exchange Act of 1391 mandated a minimum amount of payments for transactions taking place in the market.
The modern history of securities transaction costs began in the 19th century. In 1817, the Bank of England imposed someone monetary funds on stock exchanges. This was done in order to control the payment of transaction fees, which at the time could sometimes reach huge amounts. Currencies held by exchanges were also limited in order to discourage speculation and ensure that compliance with rules and regulations were met.
In the 20th century, further attempts were made to limit transaction fees associated with stock markets. Numerous rules were established in order to create more transparency in the markets and to guard against insider trading. Increasing market competition and the emergence of digital trading (in the form of computers and the internet) has seen fees drop dramatically. Today, transaction fees are much lower than in previous decades and the stock exchanges are now more efficient and liquid than ever before.
Overall, the history of securities transaction costs has been quite dramatic. At the start of the 21st century, these costs are much more regulated with multiple rules in place in order to prevent any kind of financial misconduct. Additionally, the development of digital trading has allowed for even lower costs, thereby facilitating higher levels of market liquidity and efficiency. This has allowed investors to take full advantage of the markets and has enabled them to make better decisions when it comes to investing their money.
