How New York Made Money History
Date: 29 March 2016 Share on Twitter Share on Facebook
It might not be the world’s oldest stock exchange, but it is by far the largest. The New York Stock Exchange (NYSE) is iconic through and through – from the regal Wall Street building, to the opening bell, to the digital ticker tape which is broadcast to financial districts all across the world.
With a market cap of more than $18 trillion (as at 29 February 2016), and a daily traded volume of more than $54 billion (as at 29 February 2016), it is the most valuable and dynamic stock market in the world. A bad day on the NYSE resonates across every market, and a good day can turn millionaires into billionaires.
But how did it get to this rarefied position? To learn what makes the NYSE so important and influential, we have to go back to the start…
Changing definition of a stock exchange
Stocks and bonds have been traded since the early 14th century, and possibly even earlier than that. Records show that anyone with a bit of money to their name could buy a ‘share’ of a merchant ship from busy ports such as Venice, Antwerp and Genoa. If the ship arrived at its destination, the shareholders would receive a portion of the profit – or a ‘dividend’ – made from the delivered goods.
If you are familiar with your Shakespeare, you will know that the traders and merchants of Venice frequently used the services of money lenders, who in turn bought and sold these debts between them, and so a market was born.
In 1531, the moneylenders of Antwerp created an unofficial stock exchange where promissory notes and bonds could be traded, and in 1602, the Dutch East India Company (the largest trading firm at the time) established the Amsterdam Stock Exchange – the first ‘official’ bourse in the world to trade in printed stocks and bonds.
As globalization and industrialization took off, more and more stock exchanges began emerging in port cities across the world: London (1571); Lisbon (1769); Philadelphia (1790); and New York (in 1792).
How NYSE made money history
The New York Stock and Exchange Board signed the crucial document which would establish the NYSE on 17 May 1792, under a buttonwood tree on Wall Street. The so-called ‘Buttonwood Agreement’ had just two rules: that brokers would only trade with each other; and that commissions would be 0.25%.
At first, the only stocks traded were commodities such as wheat and tobacco and government securities such as war bonds, but the Civil War of 1861 sparked a new form of trading – speculation.
Futures trading, commodities and government bonds are all still traded on the NYSE today, although the commission rates have changed a little.
The NYSE today
More than 200 years after it was created, the NYSE has proved its strength time and time again by weathering major financial storms such as the 1929 crash, and the 2008 sub-prime crisis. In fact, by 2015 the market had bounced back to record its highest ever market capital ($20.385 trillion).
Today, some of the most valuable shares in the world are traded on the NYSE, and it boasts 90% more liquidity than any other stock exchange.
So it’s no surprise that celebrities flock to Wall Street to ring that famous bell, while the world’s top financiers have spent at least a few weeks on the floor.
This is the stock exchange which sets the standard for the rest of the world, and it has been for many, many years.