NYSE — Probably Main Stock Market
5 minutes for reading
A stock exchange is a platform where market players can buy and sell securities and commodities. One of the oldest and largest stock exchanges in the US is the New York Stock Exchange (NYSE). It opened in 1792.
Today daily turnovers reach billions USD, and total capitalisation of securities is over 27 trillion USD. Some calculations say that more than 65% of all trades with stocks happen in NYSE.
Today we suggest finding out some interest facts from the history of the exchange and discussing why traders worldwide keep a close eye on its activities.
How NYSE appeared
The story of NYSE started with signing the Buttonwood Agreement by which 24 brokers formed an investing society with only 2 rules to follow. They had to trade only between each other and pay a small fee for each such trade.
The first kind of an office was a coffee shop called Tontine Coffee House. There they traded stocks but only by barter method. 25 years later, the society decided to let other players to their trades. All trades went to the exchange that goes on this way these days.
Main facts in NYSE history
In spring 1817 the New York Stock Exchange and its inner Exchange Council elected Anthony Stockholm as President of the organisation. Every morning he opened trades and showed the list of shares available for buying and selling: let me remind you that initially only five companies traded in the exchange.
The new stage of development began in 1837, when telegraph was invented. Brokers grasped at the idea fast and dragged the telegraph line everywhere possible. The goal was facilitating instant exchange of information for making trading decisions faster.
The first exchange ticket appeared in NYSE in 1867. An American Telegraph employee designed a special machine that emissed paper stripes with description of trades. These papers were sent by managers via pneumatic pipes to typewriters, and they sent the info to brokers by telegraph. Only after this process investors got valid share prices.
The first stock index — the Dow Jones Transportation Average — appeared in summer 1884. It included 9 main transport companies in the US, and calculations for the index were made by the Dow Jones company founder and Wall Street Journal editor Charles Dow. He used to analyse market behaviour actively and designed the theory that tech analysis is now based on.
During World War I that began in 1914 NYSE was shut down. Foreign investors were looking for money for military purposes and massively sold their assets in exchanges. At that time the Dow Jones index lost more than 12%, and trades were closed to avoid more crashing.
This was the longest shut-down in the history of the platform: it took about 4 months. On the opening day, the index dropped even lower. The shut-down did not save the idex from falling but we can only guess how much deeper it could have fallen.
This was not the last major falling of the stock major: on 19 October 1987 Dow Jones again lost more than 22%, and this day got the name of the Black Monday.
The crash happened not just to the stock market but to the whole of the financial system. To counter these events, the US Securities and Exchange Commission (SEC) introduced certain rules to protect private investors.
New restrictions for trading securities appeared in 2008, when another crisis happened. Dow Jones fell by 5% due to risks of bankruptcy of banks. The exchange paused opening short tradesfor several weeks. And yet after opening the market remained too volatile and kept falling.
How NYSE works
A part of trades is done not just by computers but also by people: up to 1,000 brokers work at the exchange every day. This hybrid method of work remained only there — on other platforms everything is automatic. Trade is open on weekdays, from 9:30 to 16:00.
An interesting tradition is the signal for closing trades: they ring a bell. Previously it was a large gong used for notifying brokers and dealers about the beginning of work but in 1903 it was replaced by an electronically controlled brass bell.
Ringing the bell in NYSE became a symbolic act. Representatives of companies that are just beginning to trade in NYSE get the honor to ring it.
Influence on the global economy
Capitalisation of the exchange is over 27 trillion USD, and for today it is the largest trading platform in the world. Its forming influenced not only the development of the American economy but also the global one because large sums of money from different countries and continents get accumulated and distributed during stocks trading in NYSE.
Moreover, the largest US indices in terms of capitalisation are defined in NYSE. Their calculations include the most expensive companies. For example, the NYSE Composite stock index includes 2,000 largest corporations, registered in the US and other countries.
Hence, the idea that the global financial sector is connected, among other things, to the situation in NYSE is quite true.
Closing thoughts
The New York Stock Exchange started working in 1792. This is the platform where the first stock index — Dow Jones Transportation Average — was calculated.
NYSE is the largest exchange market in the world, and the papers of the most expensive corporations are traded there. Thanks to this, the exchange passes huge sums of money through it, so it not only reflects the situation in the US economy but has a major influence on the behaviour of market players worldwide.
