Why Was the American Stock Exchange Established?
Many stock traders are familiar with the New York Stock Exchange and the NASDAQ. Those are the two American markets which are most commonly traded. However, long before the NASDAQ, another stock market emerged called the American Stock Exchange, or AMEX for short. Though, in 2008 the exchange was acquired by the New York Stock Exchange and now operates under the NYSE banner, the AMEX has a history all its own.
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Origin
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The New York Stock Exchange can be traced all the way back to the 1790s. As the NYSE emerged, they began to install rules. One of those rules was that a company had to have at least 100 shares to trade on the exchange. While that seems like nothing now, at the time there were a lot of companies that were not able to meet that demand. Therefore, brokers who would come to be known as the "curbstone brokers" began making markets for these smaller companies. They were called "curbstone brokers" because they met outside on the curb in all sorts of weather to make trades on the investors' behalf.
The Gold Rush
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As people headed west to take part in the Gold Rush during the late 1840s, many of the start-up mining companies needed capital to mine for gold. Eager to gain an investment, they turned to the "curbstone brokers" in hopes that they could sell shares of their companies. After securing capital, some of these start-up mining companies who struck gold made their investors rich as the prices of the stocks and gold soared.
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Emerging Industries
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The AMEX seemed to corner the market on emerging commodities companies. From the 1850s until after the Civil War, the AMEX was the first to trade iron, steel, textiles and certain chemical products. They also backed some of the young petroleum companies that first found oil in Pennsylvania.
New Location
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In 1921, the "curbstone brokers" decided that it was time to have an indoor location and took up residence in a building on Greenwich Street. During the early indoor years, through the Great Depression, the AMEX listed more foreign stocks than the New York Stock Exchange. This made it the place to execute trades for investors looking to invest abroad.
Options and Derivatives
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The ever-evolving AMEX continued to change through the 1970s and 1980s. It was the first exchange to list "ETFs" (exchange traded funds) as well as the first exchange to sell derivative products. Couple this with the fact that many small start-up companies continued to flock to the exchange, and the growth of the AMEX became massive.
It had to expand its trading floors several times over the decades to keep up with demand. This expansion took place even in the face of automation which made trading much quicker than the old days of flashing hand signals and writing tickets on the curb.
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References
- Photo Credit stock image by Michael Shake from Fotolia.com
