Under a spreading buttonwood tree,
The village brokers stood;
The brokers, a mighty group you see,
Would trade whatever they could;
They soon developed commission fees
Which for brokers was so good.
This might not be what Henry Wadsworth Longfellow would have had in mind as a take off on his poem, “The Village Blacksmith”; but the story of how the New York Stock Exchange began reminded me of his well known verse. The formation of the New York Stock Exchange (NYSE) supposedly happened when 24 of the most prominent brokers and speculators in the United States met and came to an agreement.
It was said they met under a “Buttonwood” tree to conceptualize the vision that marked the beginnings of the Wall Street investment community. Some cynics would say this account sounds far fetched; but by all accounts this is the way that it happened.
Where exactly was this buttonwood tree? It was near a 12 foot-high wooden stockade wall along the Hudson and East Rivers built in 1653, under the direction of Governor Peter Stuyvesant, to protect the Dutch settlers from the Lenape Indians, the New England colonists, and the British. At the same time a street was also beginning developed along the wall on the town side. This street was named Wall Street.
Over the years the attacks that were feared never materialized, and the thick plank wall began to deteriorate. Eventually, the citizens and farmers began to rip down the wall to use the planks for building materials or firewood. The wall disappeared altogether in 1699, but the street retained the name of “Wall Street.” However, it would still be more than a hundred years before the financial markets could call Wall Street its birthplace.
So what prompted these 24 prominent brokers, speculators and merchants to meet under that “buttonwood” tree in 1792? The catalyst appeared to have come at the end of the Revolutionary War when the first stock certificates were traded in the United States. It was in 1790 that soldiers and merchants who were involved in the war began redeeming the script that the Federal Government had issued to them during the war.
The birth of the investment market was marked by the these first issues of publicly traded securities. Those visionary businessmen wanted to get involved in this new and, possibly, lucrative enterprise. It was then, at that famous meeting in1792 under the “buttonwood” tree, that they agreed to sell securities as private transactions in their private organization and charge commissions for the transactions. This came to be known as the “Buttonwood Agreement.”
In the beginning the brokers conducted their business from the Tontine Coffee House on Wall Street because they had no headquarters; and they didn’t even have a name for their organization. Yet, this group would come to be known as the New York Stock Exchange (NYSE).
It was at this same time that the first bank, the Bank of New York, was created by the Government. In fact, the first corporate stock traded by the “Brokers of the Buttonwood Tree” was the Bank of New York. It was also the first company to be listed on the New York Stock Exchange.
The formal organization was established in 1817 and named the New York Stock & Exchange Board. At 68 Wall Street they soon developed a set of rules and a constitution, drafted on March 8, 1817, for conducting business. It wasn’t until 1863 that the name was eventually shortened to the New York Stock Exchange.
Since 1868 having a membership in the NYSE has been considered valuable property. Currently, prospective members must purchase exiting seats which number 1,366.
Today, Wall street has become a “pedestrian only” street. It is down that street at Federal Hall that the inauguration of President George Washington, took place on April 30, 1789. There is a statue of Washington on the exact spot of the inauguration, and the present building there, erected in 1842, was the first U.S. Customs House. From the Washington statue there is a good view of the NYSE, that is actually on Broad Street, not Wall Street. However, what stands out on the NYSE building are the sculpted figures and Corinthian columns, that have become universal symbols for U.S. commerce and finance.
The NYSE has come a long way since the “prominent 24” signed that “Buttonwood Agreement” in 1792. Here billions of dollars change hands everyday. The New York Stock Exchange, from its humble beginnings, has become the world center for financial transactions and the largest securities marketplace. Yes, indeed, under the spreading buttonwood tree…
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