The paper ‘Political Economy Origins of Financial Markets in Europe and Asia’ focuses on the expansion of trading between companies that have been granted monopoly rights. Through exploring the historical events in the development of financial market in London, Amsterdam and vaguely of foreign countries, the impact of trading monopolies is discussed. Furthermore, analysis of factors that leads to successful a country’s financial state as well as appraisal of the paper will be elucidated.

London has achieved and maintained a successful and strong financial status in the market today and it begins in 1661 when trading in stock was first introduced. The London Stock Exchange was officially established in 1733. The table “Statistics England, Scotland and Ireland to 1720” (conducted in Scott, 1912) suggested that throughout the 17^th century, East India Company (EIC) was the largest joint-stock company, followed by the Royal African (RAC) and Hudson’s Bay Company. In 1694, the Bank of England (BoE) was developed by the parliament and given the monopoly rights to issue paper money and take deposits. By the end of 1695, BoE overtook RAC as the second largest joint-stock company and reached a total market capitalization of £4.25 million. By 1703, EIC was acquired by the New East India Company (NEIC) and reached 26.6% of the total market. With 21.2% of the market capitalization, BoE became the second largest joint stock company and RAC has 13$ of the market. Hence, these three monopolies have a combined market capitalisation of more than 60% of the stock market. An Act was introduced in 1697 which attempted to regulate stock brokers’ activities through implementing a limit to the number of brokers and presenting licensing arrangements, the aim of restricting “ill-practices of stock-jobbers” (Smith, 1929). Therefore, the introduction of trading in stocks has expanded development London’s financial market.

From the 1670s to 1680s, political influence was one of the key contributions to a steady development in the London’s stock market. The Glorious Revolution of 1688 was one of the political stimulation of London’s market to maintain a steady growth. The Glorious Revolution of 1688 has shifted majority of monarchy’s power to the parliament, which the monarchy accepts and appreciates the Parliament and their law regarding to the constitutional changes: the English Bill of Rights, Mutiny Act and Toleration Act where passed on 1689. (North and Weingast, 1989) Consequently, this meaningful historical event has subsequently steered the public finances by eliminating the conflict between the monarchy and the parliament.