If you've bought a stock or an option contract anytime during the last two hundred years or so, you owe a debt of gratitude to William Duer.
Duer was a man of many talents -- lawyer, developer, signer of the United States Articles of Confederation, speculator -- and his actions in the last of those occupations inadvertently led to the creation of the New York Stock Exchange.
In the winter of 1791, George Washington signed the charter creating the Bank of the United States, a precursor to the Federal Reserve. Shares of the bank were sold in an initial public offering that was well received by investors causing their price to rise.
Using borrowed money, a group of bankers, led by Duer, began buying up all the shares they could get their hands on in an attempt to corner the market. As the supply got smaller, prices started to soar and Duer leveraged his holdings even more by using them as collateral to obtain credit lines in an attempt to create his own rival bank.
Unfortunately for Duer, he overextended himself, forcing him to suspend payments to his creditors -- many of whom held Bank of the United States shares as well -- in essence defaulting on his debt obligations.
In order to shore up reserves, many of the creditors sold their shares, causing prices to fall, which exasperated Duer's position and caused a panic among investors who began a run on the bank.
Only quick action by then Secretary of the Treasury Alexander Hamilton avoided a complete systematic collapse and saved the bank. Duer however found himself deeply in debt when the smoke cleared and spent the rest of his life in debtors prison.
In the aftermath of what is now considered the first financial panic is US history, twenty-four stock brokers met under a buttonwood tree outside of 68 Wall Street and signed the aptly named Buttonwood Agreement which stated as follows;
"We the Subscribers, Brokers for the Purchase and Sale of the Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one quarter percent Commission on the Specie value and that we will give preference to each other in our Negotiations. In Testimony whereof we have set our hands this 17th day of May at New York, 1792."
This agreement set commission rates for stock trades and required the signers of the agreement to only trade with each other in an attempt to eliminate outside speculators like Duer and the volitility that comes with them.
Twenty five years later, on March 8th, 1817, the group wrote up it's first constitution, calling themselves the "New York Stock & Exchange Board," which was shortened in 1863 to the current "New York Stock Exchange."
Since then a lot of things have changed. Regional exchanges were formed and then consolidated and new national exchanges were created. Some, like the American Stock Exchange, no longer exist, and others like the NASDAQ are still going strong. But the New York Stock exchange is still looked upon, not only in the US, but around the world, as the center of financial trading; though it now resides a bit farther down the street at 11 Wall Street.
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