A dirt path took its name from a wall of brush and mud built alongside it shortly after New York was founded as a Dutch trading post in 1609. The wall, later improved with a
wooden fence, was built to keep cows in and Indians out. Although little is known about its success with cows, by 1626, Indians were certainly allowed to enter the early business community, at least long enough to sell
Manhattan for $24 and some beads. The street, however, quickly became a center of commercial activity because it connected the docks serving the Hudson River importing business at its other end.
Early merchants had many interests. They bought and sold commodities such as furs, molasses and tobacco; they traded in currencies; they insured cargos and they speculated in land. They did not, however,
formally invest in stocks and bonds, for even as late as George Washington's inauguration, Wall Street had no securities exchange. In fact, this country's first stock exchange was established in Philadelphia in 1790.
In 1789, the first Congress of the United States met in Federal Hall on Wall Street, the place where George Washington had been inaugurated earlier that year as president. The first order of
business was to authorize the issue of $80 million in government bonds to absorb the cost of the Revolutionary War. Two years later, bank stocks were added to government bonds. This happened when Alexander Hamilton,
then Secretary of the Treasury, established the nation's first national bank, the Bank of the United States, and offered shares to the public.
Now, there were securities to trade, but still
no organized market existed on Wall Street. Investors, by word of mouth, indicated their interest in any available issue through Wall Street coffee houses or by advertising in newspapers. As the list of securities grew
with more bonds, stocks and newly formed insurance companies, a need for an organized market developed.
By early 1792, Wall Street was enjoying its first bull market. Several merchants,
encouraged by the increased activity, kept a small inventory of securities on hand which would be sold over-the-counter like any other of their wares. Today's overthecounter market got its name from this early form of
trading. Business was booming. Some days as many as a thousand bank shares would be traded.
During the last decade of the 1700s Wall Street businessmen began to schedule stock and bond
auctions, as they had for commodities. Soon, several leading merchants organized a central auction at 22 Wall Street where securities were traded everyday at noon. Customers of the newly formed "Stock Exchange
Office," or their agents, left securities with the auctioneers who received a commission for each stock or bond sold. A customer's agent, or broker, would also receive a commission for shares purchased.
With predictable ingenuity, some businessmen came to the auction only to listen. They noted the prices and, after the auction, would offer the same securities but at reduced commission rates.
Even auction members traded in the afterhours market.
On March 21, 1792 (during one of the countries first bear markets), concerned Wall Street leaders met at Corre's Hotel to establish an
improved auction market which would also better serve their own interests. On May 17, 1792, twentyfour men signed a document in which they agreed to trade securities among themselves, to maintain fixed commissions rates
and to avoid other auctions. These men are considered to be the original members of the New York Stock Exchange.
For a while, the new broker's union met under an aging tree facing 68 Wall
Street, but they soon moved indoors when the Tontine Coffee House was completed in 1793 at the northwest corner of Wall and William streets. On March 8, 1817, the members adopted a formal constitution creating the New
York Stock and Exchange Board. Every morning a list of all the stocks to be auctioned was read to the assembled board members who would then make bids and offers while seated. Only members were allowed to trade and the
privilege to sit at the auction cost $400.
(Next week we will enter the era of the 19th century.)
Quote of the Week:
"A man may know what to do and lose money if he doesn't do it quickly enough."—Jesse Livermore
