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Market story

How a pact of 24 brokers became the New York Stock Exchange

Published .

The world’s largest stock exchange began as a cartel: 24 brokers promised each other to hold their commissions. In March 1792, New York traders met in secret at Corre’s Hotel to bring order to the trade: share deals were being matched by outside auctioneers.

In May they signed a two-point agreement: to buy and sell securities only among themselves and not to charge a commission below 0.25 percent. The auctioneers dropped out of the chain, and the client paid for the guaranteed markup. A year later, in 1793, the brokers were already doing business at the Tontine Coffee House on the corner of Wall Street, and the New York Stock Exchange grew out of those two promises.

According to legend, the agreement was signed under a buttonwood tree on Wall Street, where the brokers used to meet. The exchange still celebrates its birthday on 17 May, and the agreement is still named after that tree: the Buttonwood Agreement.

Source: Wikipedia, Buttonwood Agreement

Story archive

All issues in order, newest first.

  1. How a goatskin bond outlived the guilder and pays in eurosOf the tens of thousands of manuscripts in Yale’s rare book library, one still earns interest.
  2. The pension where the last survivor winsThe tontine insured against a misfortune nobody expects: living too long.
  3. How a pact of 24 brokers became the New York Stock ExchangeThe world’s largest stock exchange began as a cartel: 24 brokers promised each other to hold their commissions.
  4. How “Bogle’s Folly” grew into trillionsThe first index fund for retail investors raised just $11 million, and competitors dubbed the venture “Bogle’s Folly.”
  5. How two traders cost the exchange its onionsA sack of onions was once worth less than an empty sack.

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