What would become the New York Stock Exchange was born 218 years ago this week. On May 17, 1792, 21 stock brokers and representatives of three firms met under a buttonwood tree at 68 Wall Street and signed what became known as “the Buttonwood Agreement” to regularize the buying and selling of public shares.
Members of the New York Stock and Exchange Board, as it was called, pledged to honor two commitments. First, to buy and sell shares only among themselves—no outsiders permitted at this table. Or as the Agreement put it, “We will give preference to each other in our Negotiations.”
Second, that their commissions on all exchanges would never be less than .25 percent (one quarter of one percent) of the transaction. Over time, both the number of members and the percent for commissions grew exponentially.
And here’s an interesting tidbit: For more than 200 years stock prices were quoted in fractions, not decimal points. The reason has more to do with Spanish pirates than English banks. In order to share some of the captured booty with their crew members, pirates would slice doubloons into eight pieces—sort of like dividing a pizza today. So 1/8th of a dollar became a common unit of measurement. Two of them were “two bits,” or 25 cents—an expression we still use today.
That is, of course, the only association between pirates and Wall Street that’s ever existed.
—Chip Wood