Friday, May 17, 2013

The Buttonwood Agreement in 1792 Gave Birth to the New York Stock Exchange

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 that would be sold over the counter like any other of their wares. Today’s over-the-counter market got its name from this early form of trading. Business was booming. Some days as many as 100 bank shares would be traded. Things were at times very chaotic and businessmen realized that it needed to be organized.

On May 17, 1792, twenty-four men signed a document they called “The Buttonwood Agreement”. In the agreement they agreed to trade securities only amongst themselves, to maintain fixed commission rates, and to avoid other auctions. The Buttonwood Agreement turned trading into a member’s only activity. The Buttonwood Agreement signers are considered to be the original members of the New York Stock Exchange. Trading took place outside, under the tree, until the Tontine Coffee House was completed the following year in 1793. The Tontine Coffee House was located at the northwest corner of Wall and William Streets.

The Buttonwood tree stood outside at about 68 Wall Street today. The tree stood on Wall Street until June 14, 1865 when it fell over during a storm. The news was treated like the death of a family member, and it was was widely reported in all the local media.