History of the Stock Market in America

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Historically two major stock market exchanges have existed in the United States: the American Stock Exchange and the New York Stock Exchange. Abbreviated the AMEX, the American Stock Exchange was originally called the "Curb Exchange." The New York Stock Exchange (NYSE) was originally known as the Stock Exchange Office. The very first exchange was in Philadelphia, and its operation served as a basis for the exchanges that came after.

Foundings

  • During the Revolutionary War, the new U.S. government did not have the funds to pay for the war effort. To gain funds, the government issued bonds with a promise of repayment in the future. The bond purchasers were given promissory notes on paper. After the war, those in control of the bonds began trading them for immediate compensation. Merchants recognized the need for a place to exchange these bonds as well as commodities; this gave rise to commercial centers, which eventually became the stock exchanges of America.

NYSE

  • In the last decade of the 18th century, 24 of the top members of the New York financial community recognized the need for an exchange. They created what was then called the Security Exchange Office. This name persisted until 1863; after that year, the exchange was referred to as the New York Stock Exchange. Since its inception, the NYSE has set limits on the minimum amount of shares that had to be offered, along with other requirements, if corporations wished to have their stock traded on the exchange. The exclusive nature of the exchange led to its becoming the premier exchange in America. During the economic boom of the early 20th century, every emerging company wanted to have its shares traded on the NYSE. Today the NYSE is the largest exchange in the United States.

AMEX

  • The early days of the American Stock Exchange saw trades taking place on the streets of New York City’s financial district. Stockbrokers would meet outdoors on the streets to discuss trades and negotiate deals. Eventually these brokers formed the New York Curb Exchange, the name by which it was known until 1953. The American Stock Exchange was long the place for companies that could not meet the standards set forth by the NYSE. As the AMEX gained support, however, they put standards in place as well. This increased the reputation of the American Stock Exchange; since then, the American Stock Exchange has become the third largest exchange in the United States.

NASDAQ

  • The NASDAQ was founded by the National Association of Securities Dealers. Founded in the early 1970s, the NASDAQ was the world's first electronic market. The NASDAQ has since partnered with a Swedish exchange called OMX and purchased the Philadelphia Stock Exchange. The NASDAQ has grown quickly, and it is today the largest electronic trading market in the world with thousands of companies listed. It is also the second largest trading market in the United States.

The Great Depression

  • The Great Depression began in 1929 and lasted nearly a decade. Arguably the worst financial crisis the United States has ever experienced, U.S. stock markets lost over 85 percent of their total value. The lessons learned from that depression, along with subsequent recessions, have brought about countermeasures and regulations to prevent an event of that severity from happening again.

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References

  • Photo Credit new york stock exchange image by Gary from Fotolia.com
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