March 21: History of the NYSE

by David Jenyns on March 21, 2007

The old stone building at 11 Wall Street, NY, NY. often inspires awe and hushed voices. It is the home of the New York Stock Exchange, the largest stock exchange in the world (by dollar volume) Futures, and fortunes are made and lost here, but how did it get here in the first place?

It all started in 1792, when 24 stockbrokers signed an agreement called the, “Button wood agreement”, outside number 68 Wall Street.

Wall Street, in the south of Manhattan, was named after the wall the Dutch Settlers built to keep the English settlers and Native Americans out, and themselves in. Why Button wood? In the newly formed country of the United States of America, most investments were in land. Merchants and brokers often traded in coffee houses, if not on the street outside those coffee houses. At that time, in the south of Manhattan, there was a huge button wood tree, (or American Sycamore, as it is more commonly known) outside one of those coffee houses and under which traders and speculators used to met and trade informally. The agreement that began the New York Stock Exchange, was signed under that Button wood tree.

The agreement was only two sentences long, and was basically a promise to only trade with each other and abide by a .25% commission. At that time the only securities to be traded were government bonds and bank stocks. The first stock traded and listed on the New York Stock Exchange was the Bank of New York, New York City’s first chartered bank.

On March 8th, 1817 the Buttonwood Agreement was formalized and a charter drawn up. They group renamed themselves, “The New York Stock and Exchange Board”. The exchanges first president was Anthony Stockholm. At this time there were 30 stocks traded on the NYSE. The president of the exchange would call out the names of the stocks individually, and the brokers would yell their bids from their assigned chairs. That is why we say people have a “Seat on the exchange”. This practice continued until about 1871. Seats on the New York Stock Exchange are leased or sold by the current owners and not by the exchange itself. In 1817 a seat would cost about 25 USD. In Dec 2005, one seat went for 4 million Dollars. That’s one expensive chair! The number of seats on the New York Stock Exchange has increased steadily throughout the years. In 1868 there were only 533 seats.

1817 was also the year the NYSE found its first home indoors, in a rented room at Number 40 Wall Street.

In 1863, the name was shortened to, “The New York Stock Exchange” Two years later, on June 1865; the famous Button wood tree was felled during a storm.

Membership on the NYSE has been very valuable since 1868. There are now 1366 seats on the exchange.

The first ticker was installed in 1867.

The first telephones were put in in 1878.

In 1883, the NYSE got its first electric lights.

The electronic displays boards so often seen were first put up in 1966.

To many of us it seems the New York Stock Exchange runs like clock work and is rarely closed. There are two notable closings of the exchange. The exchange closed briefly just after the beginning of World War One, but reopened in Nov of the same year. It also closed just after the Sept 11th attacks on the New York City’s World Trade Center. It reopened on Sept 17th, 2001.

On Feb 18th, 1971, the NYSE, INC was first incorporated as a not-for-profit Corporation.

The New York stock Exchange is about to change again. In 2005 it decided to acquire its rival Archipelago and become a for-profit, publicly traded company. Instead of selling seats on the exchange, the NYSE will now sell one year licenses to trade on the exchange. There are now over 2700 stocks on the NYSE, including 453 from 47 different countries.

Whatever changes are ahead for the New York Stock Exchange, some things seem certain. That the old stone building on 11 Wall Street will continue to inspire awe is one of them.

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