Investing 101
Lesson 1: Stocks and Their Value
Brief History of the Stock Market
The United States stock market had meager beginnings. On May 17, 1792, 24 brokers signed an agreement forming the first organized stock market in New York under a Buttonwood tree at what is now 58 Wall Street. They agreed to sell shares or parts of companies among themselves and charge people a commission or fee to buy and sell shares for others. It wasn't until March 8, 1817, that a formal constitution was adopted and the first stock exchange was formed under the name "New York Stock & Exchange Board."
From the late 1700s until about 1860, brokers made markets outdoors. The first stock ticker was introduced in 1867. Formal memberships in a stock exchange first became salable in 1868. In 1869, the New York Stock Exchange (NYSE) started to require the registration of securities by its listed companies to prevent over-issuance.
The New York Stock Exchange was not the only way to buy stocks during the 1800s. Stocks that were not good enough for the NYSE were traded outside on the curbs. This so called "curb trading" became what is known today as the American Stock Exchange, which finally moved indoors in 1921. It wasn't until after the crash of 1929 that government regulation of the stock market was formalized with the Securities Act of 1933, to provide full disclosure to investors and prohibit fraud in connection with the sale of securities. The Securities Exchange Act of 1934 provided for the regulation of securities trading and established the Securities and Exchange Commission (SEC). In the 1940s and 1950s trading in commodities and monetary instruments became part of the stock exchanges, as well as automated trading functions.
In 1971, the NYSE was incorporated and Merrill Lynch was the first member organization listed in July. In this week's field trip, you'll visit Web sites to explore the early days of the stock market.
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