The NYSE history – a Wall Street story

The NYSE history – a Wall Street story

NYSE – The mastodon that is still making history

Everyone knows that if we talk about shares, trading, IPOs, places that make money move, we are talking about stock exchanges. Since the beginning of time, people were trading vegetables or fruits for services, eggs for meat, and later on money in exchange for something. It wasn't a centralized procedure. So, as time passed and everything was happening at a faster pace, something had to be done. And something was done – the stock exchange came to life. From the merchants of Venice to the East India Companies and coffee shops to New York Stock Exchange and Nasdaq, traders kept the markets going from 1300 to this day.

We will now focus on what specialists consider to be one of the most important stock exchanges in the world - the New York Stock Exchange, or NYSE.

Emergence

Although the NYSE is one of the prominent exchanges in the States, it was not the first official one. The honor goes to the Philadelphia Stock Exchange (PHLX) created in 1790. Though it set the ground to stock exchanges, the funny thing is that it wasn't, in fact, focusing on stock trading, but on equity, index options, and currency.

NYSE, initially named New York Stock & Exchange Board, was established in 1792 at 68 Wall Street when 24 brokers and merchants put the basis of securities trading. It all came under the Buttonwood Agreement. The agreement created a trust between brokers and merchants as they would represent the public's interest while trading. By this, they trusted each other, and all transactions and payments will be in good faith. It was in 1863 when it became what we all know today – New York Stock Exchange. And, as the times were, only men participated in trading.

Even back then, the location mattered, so being located on Wall Street - the epicenter of coming and going from the U.S., and the hotspot for banks and corporations – made the NYSE quickly dominate the market. Soon, it became one of the wealthiest institutions, after it imposed listing requirements and started demanding fees.

In the beginning, there was a gavel

Until 1870, a gavel announced the start and the end of a trading session, but it got replaced by a Chinese gong. The gong worked until 1903, and when the Exchange moved to the building in which it stands even today, a brass bell replaced the gong - a bell that functioned electrically. The bell was custom made because it had to be large enough to resonate on the whole floor. Nowadays, the exchange consists of four areas, and each has its bell. The bell sounds for slightly more than 3 seconds.

The bell is used not only to open and close a session but also to mark a financial-related event or celebrate a significant event in New York. The first one who had this honor was a ten-year-old boy, named Leonard Ross, in 1956. He won a TV quiz show by answering questions related to the stock market. In time, business executives and celebrities have rung the bell. After the 9/11 attacks, the New York police and fire departments on duty had the privilege to ring the bell.

Events

As the American economy rose, so did the NYSE, and soon it became the most important exchange in the world.

The Roaring Twenties brought the 1920-1921 Forgotten Depression, which made the market drop almost 50%, and the corporate profits dove by 90%.

Soon after the Forgotten Depression, there came the Great Depression, which still gets mentioned nowadays. It started on October 24, 1929, also known as Black Thursday, when the U.S. stock market crashed, and it ended after World War II, in 1946, as the market started to be bullish, moved by a rising in private investments from $10.6 billion to $30.6 billion. According to specialists, the Great Depression was “the most catastrophic economic event of the 20th century.”

One decade later, in 1967, a female, named Muriel Siebert, was allowed to trade alongside men.

In 1971, it became a corporation that wasn't operating for profit.

Two events marked 2006: NYSE became a publicly traded company, and traders and the public began to trade stock using an electronic system.

2007-2008 – NYSE and Euronext merged, and the first purchased the American Stock Exchange.

In 2012, the Intercontinental Exchange bought NYSE for $8.2 billion.

Trading

After it started in the streets, and over time it reached the point when trading was done through phone, the New York Stock Exchange reached the point where it was a hybrid market for some time. Stockbrokers would send orders through the electric platform, or to the trading floor, and floor brokers handled orders.

Now, most of the transactions are electronic, with computers that match buyers and sellers.

There’s New York, and there’s the rest of the world

In more than two centuries, the NYSE had very little competition. Countries like Germany, France, Japan, and South Africa put out their own stock exchanges, and even though London became the main point in Europe when it comes to listing, still, companies chose New York. London Stock Exchange was just a detour from landing in the major league of listing.

Though it started to have competitors home, like the S&P 500 and Nasdaq, it is still the mightiest stock exchange in the world. Its market cap is more significant than Tokyo, London, and Nasdaq all together.

Now, no one can know where NYSE is heading to given the current situation, but one can hope for the best. Keep an eye on our Featured Articles section to find out more about the financial markets. While you are at it, move the cursor a bit higher and click on Trading Academy, a section created to improve your knowledge about this field.

Sources: nyse.com, corporatefinanceinstitute.com, nyse.com


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