What Does A Buttonwood Tree Have To Do With the New York Stock
Exchange?"
Under a spreading buttonwood tree, The village brokers stood;
The brokers, a mighty group you see, Would trade whatever they
could; They soon developed commission fees Which for brokers was
so good.
This might not be what Henry Wadsworth Longfellow would have had
in mind as a take off on his poem, "The Village Blacksmith"; but
the story of how the New York Stock Exchange began reminded me
of his well known verse. The formation of the New York Stock
Exchange (NYSE) supposedly happened when 24 of the most
prominent brokers and speculators in the United States met and
came to an agreement.
It was said they met under a "Buttonwood" tree to conceptualize
the vision that marked the beginnings of the Wall Street
investment community. Some cynics would say this account sounds
far fetched; but by all accounts this is the way that it
happened. Where exactly was this buttonwood tree? It was near a
12 foot-high wooden stockade wall along the Hudson and East
Rivers built in 1653, under the direction of Governor Peter
Stuyvesant, to protect the Dutch settlers from the Lenape
Indians, the New England colonists, and the British. At the same
time a street was also beginning developed along the wall on the
town side. This street was named Wall Street. Over the years the
attacks that were feared never materialized, and the thick plank
wall began to deteriorate. Eventually, the citizens and farmers
began to rip down the wall to use the planks for building
materials or firewood. The wall disappeared altogether in 1699,
but the street retained the name of "Wall Street." However, it
would still be more than a hundred years before the financial
markets could call Wall Street its birthplace. So what prompted
these 24 prominent brokers, speculators and merchants to meet
under that "buttonwood" tree in 1792? The catalyst appeared to
have come at the end of the Revolutionary War when the first
stock certificates were traded in the United States. It was in
1790 that soldiers and merchants who were involved in the war
began redeeming the script that the Federal Government had
issued to them during the war. The birth of the investment
market was marked by the these first issues of publicly traded
securities. Those visionary businessmen wanted to get involved
in this new and, possibly, lucrative enterprise. It was then, at
that famous meeting in1792 under the "buttonwood" tree, that
they agreed to sell securities as private transactions in their
private organization and charge commissions for the
transactions. This came to be known as the "Buttonwood
Agreement." In the beginning the brokers conducted their
business from the Tontine Coffee House on Wall Street because
they had no headquarters; and they didn't even have a name for
their organization. Yet, this group would come to be known as
the New York Stock Exchange (NYSE). It was at this same time
that the first bank, the Bank of New York, was created by the
Government. In fact, the first corporate stock traded by the
"Brokers of the Buttonwood Tree" was the Bank of New York. It
was also the first company to be listed on the New York Stock
Exchange. The formal organization was established in 1817 and
named the New York Stock & Exchange Board. At 68 Wall Street
they soon developed a set of rules and a constitution, drafted
on March 8, 1817, for conducting business. It wasn't until 1863
that the name was eventually shortened to the New York Stock
Exchange. Since 1868 having a membership in the NYSE has been
considered valuable property. Currently, prospective members
must purchase exiting seats which number 1,366. Today, Wall
street has become a "pedestrian only" street. It is down that
street at Federal Hall that the inauguration of President George
Washington, took place on April 30, 1789. There is a statue of
Washington on the exact spot of the inauguration, and the
present building there, erected in 1842, was the first U.S.
Customs House. From the Washington statue there is a good view
of the NYSE, that is actually on Broad Street, not Wall Street.
However, what stands out on the NYSE building are the sculpted
figures and Corinthian columns, that have become universal
symbols for U.S. commerce and finance. The NYSE has come a long
way since the "prominent 24" signed that "Buttonwood Agreement"
in 1792. Here billions of dollars change hands everyday. The New
York Stock Exchange, from its humble beginnings, has become the
world center for financial transactions and the largest
securities marketplace. Yes, indeed, under the spreading
buttonwood tree...
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