Acting on Alexander Hamilton’s view that “…there must be a line of separation between honest men and knaves, between stockholders and dealers in the funds, and mere unprincipled gamblers,” a group of 24 men formed the predecessor to the New York Stock Exchange, this week on May 12, 1792.

The brokers had regularly met under a buttonwood (sycamore) tree in downtown New York, wheeling and dealing in the burgeoning financial world of the young nation. But a series of stock scandals had rocked investors, causing the two-dozen traders to sign the aptly titled Buttonwood Agreement in order to present themselves as the most honorable group to deal with.

Additionally the pact gave birth to fixed commissions as the traders “solemnly promise and pledge ourselves to each other that we will not buy or sell from this date, for any person whatsoever, any kind of public stocks at a rate less than one quarter of one percent commission on the specie value, and that we will give preference to each other in our negotiation.”

The Buttonwood brokers’ first IPO - the Bank of New York - was a huge success, and the men soon moved to an indoor locale. By 1817, a formal constitution was adopted and the now named New York Stock & Exchange Board met in rented quarters at 40 Wall Street. Amazingly, other financiers, the so-called “curb traders,” stuck with outdoor venues until the 1920s.

news@doubledownmedia.com

5/12/08