Origins: from David to Goliath
Jul 01, 2016 12:15PM
By Neighbors Magazines
by John Masus
It all started about 225 years ago. In fact its cause started during the Revolutionary war and one of the solutions came about a short time later. May 17, 1792 to be exact and outside under a Buttonwood tree in New York. (What’s a Buttonwood tree?)
The address: 68 Wall St. The event: the beginnings of what would come to be known as the New York Stock Exchange (NYSE). 24 brokers got together on the curb outside and decided to form an association called the Buttonwood Agreement. Commission rates were established and the signers would give preference to each other when it came to trading. In the beginning, the primary securities traded were government bonds to help pay off the debt from the Revolutionary war.
So the cause: the war debt. The solution: the Buttonwood Agreement. In addition to paying off the war debt the brokers also wanted an organized system to trade securities. After signing the agreement they adjourned to the Tontine Coffee House where they took up residence.
In those early years the agreement was reformed and renamed the New York Stock and Exchange Board on March 8, 1817. Different locations were used until 1865 when they moved to their present quarters at 11 Wall St., Lower Manhattan, New York City, NY.
From these humble beginnings the David became the Goliath it is today with almost 1,900 companies listed at a market value of approximately $19.69 trillion as of May 2015. It is the world’s largest stock exchange. The approximate daily trading value was $169 billion in 2013.
So what about that other one? You know, the American Stock Exchange. Its history is even more compelling and dates back to 1849. It formed in New York but with a twist. At its start it was actually called the Curb Market.
That is not a play on words. Business was actually conducted outside on the street curb on Broad St. right next to the now established New York Stock Exchange (NYSE).
The Curb traders were a very hardy bunch. They didn’t want to join the NYSE nor were they in competition with it. They had a whole different business model. They traded on the curb until 1921. You read that right, 1921. History doesn’t record why they stayed outside but I have to believe they wanted to prove they could.
By 1849, the NYSE was somewhat elite, probably too high and mighty (my thoughts) and these guys on the curb were the mavericks.
They traded in stocks not listed on the NYSE. Their mission was primarily trading stocks of younger and emerging companies. A lot of these startups would come and go, sometimes rather quickly. However, some of these companies were successful and ended up moving to the big board on the NYSE. The Curb also played a role in the service industries and gold mining operations related to the 1849 Gold rush. There were some large company stocks traded on the Curb Market. Less financial information and reporting were needed. In other words less red tape and more immediate action.
The Curb Market decided to come indoors permanently in 1921 and over the years which involved scandals and significant reforms, matured into a major trading exchange. In 1953 they changed their name to The American Stock Exchange and in 2008 established a union with the NYSE.
Two very different paths to prominence meeting at the same place.