What It Looked Like: American Stock Exchange

Shares with a total value of $20 trillion are traded on the New York Stock Exchange. This is where the great companies are born and the Great Depression started.

The New York Stock Exchange was founded by 24 influential brokers who signed the Buttonwood Agreement in May 1792. It set a floor commission rate charged to clients at 0.25% and bound the signers to give preference to the other signers in securities sales. The earliest securities traded were war bonds from the Revolutionary War and the First Bank of the United States and Bank of New York stock.

{“img”: “/wp-content/uploads/2015/09/exchange_01.jpg”, “text”: “Tontine Coffee House, New York City, circa 1820. Property of New York Public Library.”}

{“img”: “/wp-content/uploads/2015/09/Finance_12.jpg”, “text”: “Curb Street Brokers and Broad Exchange, New York City, 1906. Property of US Congress Library.”}

{“img”: “/wp-content/uploads/2015/09/Finance_13.jpg”, “text”: “Signalling to Offices, Curb market, New York City. Property of US Congress Library.”}

Up to 1817 brokers worked in Tontine Coffee House, after that the trading moved to the streets, to several rented buildings until, in 1865, the Stock Exchange settled at its current address, 11 Wall Street. The current building of the Stock Exchange was erected in neoclassical style at the beginning of the 20th century by architect George Post and cost $4 million.

{“img”: “/wp-content/uploads/2015/09/Finance_15.jpg”, “text”: “New York Stock Exchange, 1904. Property of US Congress Library.”}

{“img”: “/wp-content/uploads/2015/09/Finance_11.jpg”, “text”: “New York Curb Exchange, 1931. Property of US Congress Library.”}

Probably the most famous event in the history of New York Stock Exchange was its crash that started on a Black Thursday, October 24, 1929. The speculation boom of the previous ten years led to the increase in the numbers of stock from 171 million in 1921 to 1 billion in eight years.

Many Americans bought stock for the money, borrowed from the banks in loans secured by other stock.

When the stock exchange crashed, the banks could not get their money back and many of them went bankrupt. The American stock market lost $30 billion, 40% of its volume at the time. The crash was followed by the beginning of The Great Depression in the US.

{“img”: “/wp-content/uploads/2015/09/Finance_10.jpg”, “text”: “The New York curb market telephone clerk calling one of the members on the floor, 1929. Property of US Congress Library.”}

{“img”: “/wp-content/uploads/2015/09/Finance_06.jpg”, “text”: “Crowd of people gather outside the New York Stock Exchange following the Crash of 1929, Property of US Congress Library.”}

One of the few positive outcomes of the crash was the founding of the US Securities and Exchange Commission in 1934. Through this Commission increasingly strict rules for trading were set. In particular, buying shares on credit was prohibited, emitting companies were now obliged to disclose information that is important for the market, and brokers have to go through obligatory licensing and registration. Today, in order to participate in trading, one must take a strict exam by the Federal Financial Institutions Examination Council.

{“img”: “/wp-content/uploads/2015/09/Finance_08.jpg”, “text”: “New York Stock Exchange Head Charles Gay at Senate hearing. Washington, D.C., 1937. Property of US Congress Library.”}

When the New York Stock Exchange is closed, it is a sign, and at the same time, a cause of financial catastrophes. The Stock Exchange is very rarely closed, to stop the panic when the market crashes, and more often due to natural disasters and technical malfunctions.

The longest period when the Stock Exchange was closed was during WWI.

On August 1, 1914, in order to avoid the panic-driven sell-off of shares, trading was paused. It was restarted in four months, on December 12, to facilitate the purchase of government bonds and support the war budget. During WWII, the Stock Exchange continued to work and even expanded.

{“img”: “/wp-content/uploads/2015/09/exchange_05.jpg”, “text”: “Traders celebrate as the market closed an active session after the Good Friday holiday, April 8, 1939. AP Photo / EAST NEWS.”}

In 1971, the New York Stock Exchange became a non-profit organization, owned by 1366 individual members. You could become a member if you bought a seat. The cost of a seat directly depended on the prices of the shares: the higher the volume of operations, the more expensive it was to become a member. In the 20th century, the lowest price for a seat was in 1942, when it cost $17,000, and the highest was in 1999, at $2,650,000. In 2005, the Stock Exchange became a joint-stock company again, and it now belongs to the Intercontinental Exchange corporation. Permission to participate in trading only costs $40,000.

{“img”: “/wp-content/uploads/2015/09/Finance_02.jpg”, “text”: “Floor of the New York Stock Exchange, 1963. Property of US Congress Library.”}

The loudest part of New York Stock Exchange was and remains the exchange traders floor. To speed up buying and selling, brokers here communicate with special gestures. Breaking the contract that was concluded with gestures, but not signed yet, is punishable with fines and damages the trader’s reputation.

{“img”: “/wp-content/uploads/2015/09/Finance_09.jpg”, “text”: “The New York curb market: broker trying to draw the attention of his telephone clerk, 1929. Property of US Congress Library.”}

{“img”: “/wp-content/uploads/2015/09/Finance_07.jpg”, “text”: “Traders working, 1936. Property of US Congress Library.”}

New York Stock Exchange was the first to start using a stock ticker to transmit the current stock prices to brokerages scattered around town. In 1869, Thomas Edison created one of the best models, and it became his first profitable invention. The main issue with these machines was their speed – one symbol a minute. That’s why they started to abbreviate the names of share issuers when they telegraphed them – this abbreviation is now called a ticker. For instance, the New York Stock Exchange ticker is NYSE.

{“img”: “/wp-content/uploads/2015/09/exchange_03.jpg”, “text”: “Floor of New York Stock Exchange, 1934. Property of US Congress Library.”}

Since 1995, NYSE brokers started using palm computers to work, which made the floor much more quiet and is slowly killing the art of gestures. In 2007, an electronic system was launched that allows for requests to be sent to the floor or to directly buy shares from anywhere in the world. 82% of deals are now done this way.

Only a small number of the most expensive securities are now traded on the floor of New York Stock Exchange.

From the movies, including the “The Wolf of Wall Street” by Martin Scorsese, people get the idea about the superincome of American brokers. The Stock Exchange did have its stars – for instance, Jesse Livermore earned $3 million in one trading session in crisis 1907. However, these days the income of an average trader on New York Stock Exchange is $50,000 a year (Us average salary in 2014 – $39,000), and in favourable conditions they can earn up to $150,000 a year through bonuses and commissions.

{“img”: “/wp-content/uploads/2015/09/exchange_02.jpg”, “text”: “New York Stock Exchange trading floor, 1980. Property of US Congress Library.”}

{“img”: “/wp-content/uploads/2015/09/exchange_04.jpg”, “text”: “A specialist on the floor of the New York Stock Exchange at the close of trading 11 December in New York. The Dow Jones Industrial Average had fallen some 130 points during the day. JON LEVY / AFP / EAST NEWS.”}

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