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An overview of the first Royal Exchange, opened by Sir Thomas Gresham in London in 1570. The exchange was primarily a place for merchants and traders to do business with each other.
Courtesy of Folger Shakespeare Library; CC-BY-SA 4.0
Sir Thomas Gresham was an English merchant, financier, and founder of the Royal Exchange.
Gresham was educated at the University of Cambridge and later trained as a lawyer. He was an agent of the English government in the Low Countries, where he engaged in espionage, smuggled war materials and bullion, and negotiated with his governmentâs foreign creditors. The repayment of loans and interest owed by England caused exchange fluctuations between countries which increased the sums that the English government had to repay; Gresham operated in the foreign-exchange market to alleviate these fluctuations. He understood the power of governments to affect the rate of exchange and even suggested the creation of an exchange-equalization account. It was Gresham who advised Queen Elizabeth I to recoin the currency following her fatherâs debasement of it with inferior metal. Thus, his name would later be associated with the monetary principle, hence known as Greshamâs law, which may be summarized by the aphorism that âbad money drives out good.â
In order to provide a convenient meeting place for the bankers (exchange dealers) in London, Gresham built the Royal Exchange (1566â68), which at first was called the âBourseâ and received its present name by royal proclamation in 1571.
