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How have the development of key structures as NYSE and NASDAQ shaped their roles in the evolution of Wall Street and the global financial system ?
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The name Wall Street was originally taken in the 17th Century, while New York was called “New Amsterdam” as it had been built by Dutch people. These people, worrying about an English invasion of their small colony, build a 2 300 feet long wall, going through the location of today Wall Street, with gates approximately at the modern intersections of Wall Street and Pearl Street, and Wall Street and Broadway. This led the future wave of English settlers to name the place Wall Street, after the wall which ran along the road.
The Wall covering the New Amsterdam in this “Castello Plan New Amsterdam, 1660” by Joan Blaeu
The first exchanges in Wall Street were…slaves ! In fact, when the English took over the place in 1711 and renamed it New York, there wasn’t any financial center in the city ; they named Wall Street as the new financial place, and in fact the city’s slave market. Given the significant role that slavery played in the economics of the thirteen colonies, this quickly established the financial center of gravity in the young city. Mens made fortunes trading slaves on the auction blocks of Wall Street, a practice that would not end for over 100 years.
A few years later, in the late 18th century, NY traders felt the need to concur against the financial center in Philadelphia, the only trading place in US at the time. The result was the Buttonwood Agreement, named for the sycamore (or “buttonwood”) tree on Wall Street under which New York’s traders often met.
They set up shop under this tree in good weather (in bad weather, they used a local coffee shop, then a rented space), to trade only with each other and for a 0.25% commission. The men conducted the business of the day in tails and top hats; new members had to be voted in by existing ones, and a fee was charged for the right to sit at the table.
But Wall Street was rocked almost immediately by a scandal. William Duer, an early investor in the Bank of New York founded the year behind, and a well-known figure in society circles, found himself sentenced to debtor's prison after many of his curbside stock trades, funded on borrowed money, failed. Right after, maintaining the bank became a main problem as his assets were missing.
The original Buttonwood Agreement signed on May 17, 1792.
“ The new marketplace took some time to recover from the unwinding of his positions, and the banks recoiled at having lost money at a time when the new federal government was pressing them for funds ” – Charles Geisst, author of Wall Street: A History (Oxford University Press, 1997)
Not long after, the Buttonwood traders built the New York Stock and Exchange Board, modeling it after the successful Philadelphia Merchants Exchange. As New York became an increasingly eminent part of the American economy, companies and traders tended more and more to set up in Wall Street rather than in Philadelphia. Furthermore, the opening of the Erie Canal, the nation’s first power plant on Pearl Street, and the first telegraph had a huge influence on the grown of Wall Street.
By the 20th century, the center of U.S. commerce had long since shifted to Wall Street. By the end of World War I, it had even surpassed the trading floors of London.