Wall Street is in New York’s Lower Manhattan. It was so named because a wall was built there in 1653 by Peter Stuyvesant, the Dutch governor of the city then known as New Amsterdam, to protect the city’s residents from the “Indians,” as they were known at the time, and from a possible British invasion. The wall itself was never put to the test, but lent its existence to the name of the street running alongside it.
Bonds Led the Way in Early Wall Street Day Trading
In 1789, to cover debts of the government and its colonies, the first U.S. Congress, via its central bank, issued what were known as treasury bonds to the value of $80 million. These were sold to the general public. In those days, Manhattan’s population numbered around 34,000, and Wall Street was still an unpaved dirt road. Along its sides, trading houses stood and transacted international commodity sales. Before long, Wall Street’s trading houses also began selling lottery tickets, stocks, and bonds. The hottest items during that period, and in fact the items around which speculative trading began, were bonds. In those days, a person wishing to buy or sell stocks or bonds had to issue a public notice or sell to friends. As demand grew, two renowned trading houses of the time—Leonard Bleecker at 16 Wall Street and Sutton & Harry at 20 Wall Street—began holding supplies of bonds and stocks.
Stock trading also began to develop on Wall Street. Investors assisted in setting up and developing companies by investing their money in return for a deed of shares confirming their investment in writing and providing them with a holding in part of the company. These deeds served as security and proof of ownership, and assured the investor’s stock in the company. This led to several synonyms that would come into use over time, among them “securities” (signifying they were securely held by their owner) and “equities” (indicating entitlement to part of the capital).
Market crashes Influenced Wall Street Stock Trading
Following the financial credit crisis known as the Panic of 1792, one of many “crashes” that would take place in Wall Street’s history, traders decided to institutionalize their stock trading activities and establish one place where it would be possible to control and document all transactions. In May of 1792, the traders and market makers signed the Buttonwood Agreement, named such because it took place beneath the sycamore (buttonwood) tree that stood outside 68 Wall Street. The agreement saw the formal establishment of the New York Stock Exchange and the setting of standardized trade commissions.
Wall Street has taken on many different semblances since its first transaction. Most of the changes arose from the ongoing struggle between two immensely powerful parties: the investment houses and the government. The former has constantly sought to operate without supervision, taking advantage of any and every opportunity for stretching their long arms deep into the public’s pocket. On the other side of the divide, the government has generally sought to set the rules and regulations that restrain the insatiable appetites of Wall Street traders for money.
The famous New York Stock Exchange (NYSE) edifice was built in 1827 on the corner of Wall Street and Hanover Street. In 1842, a competing stock exchange known as the American Stock Exchange (AMEX) was established. Simultaneous to a period of worldwide economic prosperity, Wall Street developed its role as the most important international financial center.
In the late 1890s and early 1900s, a new phenomenon began to pick up steam. Throughout the United States, “stock shops,” also known as “bucket shops,” sprouted up. The term was imported from Britain, where it had clear connotations of illegal activities. Clients of these day trading rooms traded in stocks for speculative purposes without actually making a stock exchange transaction: in actuality, gambling. When the trader profited, the shop lost, and vice versa. The stock rates were continually telegraphed in from New York throughout the entire live trading day. They were called out by one clerk and simultaneously written down by another on a large board facing the public, allowing everyone to the see the day trading stock picks. Because the shop’s interests were diametrically opposed to those of the trader, swindling was endless, and these shops were perceived as unreliable. A detailed description of these activities is found in Edwin Lefèvre’s Reminiscences of a Stock Operator. In 1930, during the Great Depression, these day trading shops were finally made illegal.