Stock Market Revolution: Establishment of the New York Stock Exchange on March 8, 1817
The New York Stock Exchange (NYSE) is the gigantic kingpin of the world's stock exchanges, boasting a staggering market capitalization of over $28 trillion. Its fascinating journey began under much humbler circumstances, as a group of 24 broker and merchant rebels gathered in May 1792, signing the Buttonwood Agreement under a buttonwood tree near 68 Wall Street in NYC.
Their purpose was to set up a new system for buying and selling securities such as bonds and shares, providing an alternative to the traditional auction method for soft commodities like wheat and tobacco. The Buttonwood Agreement aimed to bring transparency, reduce commission rates, and weed out unscrupulous dealers.
In the early days, investing was surprisingly straightforward with just five securities, mainly bonds, listed from the Tontine Coffee House headquarters. As American trade flourished, New York surpassed Philadelphia as the financial hub of the United States in the 19th century. At this time, the exchange was run from a collection of rented rooms at 40 Wall Street, with the president of the exchange reading out a daily list of securities for brokers to trade.
The addition of the Erie Canal and the arrival of railways in the 1830s brought a business boom to the exchange. By 1835, daily trading volumes had skyrocketed 50-fold to an average of 8,500 shares, demonstrating the rapid growth of the NYSE.
The exchange has moved locations several times throughout its history, and endured numerous boom-and-bust cycles on its way to becoming the world's most important stock market.
Meanwhile, the stock market crash of 1929, with the Dow Jones Industrial Average plummeting and triggering the Great Depression, signaled a monumental change. This event exposed weaknesses in market oversight and led to sweeping reforms, such as the Securities Act of 1933, the Glass-Steagall Act, and the Securities Exchange Act, which established the Securities and Exchange Commission.
In the following years, the exchange recovered alongside the American economy, with trading volumes soaring post-World War II. The launch of NASDAQ in 1971 introduced electronic trading, increasing competition and innovation in financial markets.
As the 21st century dawned, the NYSE embraced electronic trading, broadening access, increasing speed, and improving transparency. Mergers with other exchanges such as Euronext expanded its global reach, ensuring the NYSE remains the leading player in the world of global finance.
Investors began trading bonds, one of the initial securities listed on the NYSE, even before it moved from its headquarters at the Tontine Coffee House. As the exchange evolved, it introduced new financial instruments, like the Securities Act of 1933 and the Securities Exchange Act, which established the Securities and Exchange Commission, further highlighting its significant role in bond and finance markets.
