HISTORY OF THE STOCK MARKET
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HISTORY OF THE STOCK MARKET
The financial markets of the United States, today, are collectively
known as “Wall Street.” These words represent the heart of the business
and financial world in the United States conjuring up well known images of
companies being bought and sold, traders screaming out to get the best
prices for their clients, fortunes won and lost many times over, and the
billions of dollars exchanged in deals. Some may even claim that it is the
“Crystal Ball” that can predict and control the economy.
Wall Street actually does exist, physically, in New York City. It became
the symbol of financial dealing from its own history of being the base of the
large scale business dealings in Colonial America. Wall Street has also
become the term that describes several stock exchanges and broker/
dealer networks that have come into the computer age of finances. One
might find it strange that this financial center actually started out as a
barrier of mud and brush built by the early Dutch settlers to keep their live-
stock in and the local Native American tribes out. The street’s location put
it in the perfect position to become the base for the import/export traders
of the new colony to control business.
THE NEW YORK STOCK EXCHANGE
Despite the fact that New York City was the temporary capital of the
United States from 1785 to 1790, the first real stock exchange was begun
in Philadelphia, Pennsylvania in 1790. In 1789, Alexander Hamilton, the
first Secretary of the Treasury, recommended to Congress that bonds sold
to finance the Revolutionary War should be backed by the fledgling
federal government. These almost worthless-at-the-time bonds jumped in
value when the government backed them up. Hamilton followed up on this
strategy by selling stock to the public in the first national bank in America.
It was from this modest beginning that Wall Street became the financial
center of the United States; since the Congress was meeting on this very
street, in New York. The trading of securities was rapidly becoming a
business of its own and even began following a schedule for daily sales at
22 Wall Street as early as 1792, when the first “Bull Market” was recorded.
The appearance of brokers, who worked for a fee or commission was also
recorded in 1792. With the constantly rising value of the stocks and some
securities, brokers actually formed partnerships. at reduced fees, to control
the exchange process. The New York Stock Exchange was born out of an
agreement among twenty-four men to trade securities only among their
membership to control commissions and transactions. This happened on
17 May 1792, at 68 Wall Street, under the large buttonwood tree that would
give the agreement its name---”The Buttonwood Tree Agreement.” The
London Stock Exchange, the world’s oldest, was officially begun only
nineteen years earlier. Ironically; the Stock Market, which forms the back-
bone of U.S. business actually started out as a cartel , that used the some-
what distasteful practice of price-fixing to control the marketplace. The
New York Exchange would move several times over the years from the tree
at 68 Wall Street to its present location at 11 Wall Street. The first real
organization would occur in 1817 with the establishing of a constitution and
rules of practice. To be a member of the exchange board, at that time,
cost $400.00. Today, the same seat costs thousands of dollars, but hardly
anyone actually sits while trading today.
THE AMERICAN STOCK EXCHANGE
The Gold Rush of 1849 caused a great rise in trading values in the
Stock Exchange and the new railroad industry added fuel to this fire. With
this expansion of the trading market, came the “high risk” stocks. The
members of the New York Exchange felt that these stocks were not safe
investments and a subgroup known as “curbstone brokers” literally began
trading them in the street. This area was between William and Beaver
Streets in New York City and gave rise to the use of hand signals and
lamp posts as markers for brokers operating from offices in the street sides.
This new group of brokers came to be known as the “New York Curb
Market Association”, under charter, in 1911. The name would change in
1953 to the “American Stock Exchange” and remain the second largest
formal trading agency in America.
The use of computers in the trading system has given rise to a new
group of electronic brokers, known as The National Association of
Securities Dealers. Their trademark is the automated quotation system;
hence the term and identifier---NASDAQ.
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