Wednesday, February 10, 2010

Stock Exchange Information Prior to 1901 (2)

There has been some rather notable diversity in the business of the New York Exchange and other American exchanges. For example, the Philadelphia Stock Exchange has long been noted as the market for various street-railway securities. This was because Philadelphia capitalists had interested themselves particularly in that form of investment. For similar reasons the Boston Stock Exchange, though not an organization which commanded the resources and capital of New York, monopolized for many years, and largely controls now, the trading in shares of copper-mining companies.

Stock exchanges of Continental Europe have in general devoted themselves to transportation enterprises of their own countries, to their own Government's securities, and to securities of other European governments which came to those markets to raise capital. More recently the stock exchanges of Paris Berlin, and Vienna have followed London's example in taking up on a large scale shares of incorporated industrial enterprises. This has been particularly true of Berlin, where the iron industry has been extensively exploited in this form.


Stock exchanges as an institution had their origin at the time of the creation of public debts on the modern plan, at the close of the seventeenth century. The incorporation of the East India Company in London further developed the possibilities of the raising of public capital for corporate uses through the medium of stock-exchange trading. In 1720 the enormous public speculation in the shares of the South Sea Company in London and of the Mississippi Company in Paris brought stock-trading to a height never before conceived of. No city at that time, however, possessed a stock exchange in the sense now attached to the term. In London transactions in stocks were conducted through stock brokers, whose headquarters were at Jonathan's and Garraway's Coffee Houses in ' Change Alley.'

There does not appear to have been any formal organization among these brokers. Addison in the Spectator speaks humorously of having been taken for one of their number by the stock-jobbers at Jonathan's. The London Stock Exchange Building was not erected until 1801; the Paris Bourse not until 1826. The New York Stock Exchange membership, even after it had become a formal organization, conducted its business in hired rooms until December, 1865, when the building was erected on Broad and Wall Streets, which has been replaced by the new structure on the same site, dedicated in April, 1903.

The history of stock exchanges is very largely a mirror of the financial history of the community in which they are situated. The New York Stock Exchange rose to a position of real prominence only after the Civil War. Even at that time the fact that it did not deal in gold as a commodity threw a great part of the community's highly speculative business over to the Gold Exchange, which was formed for that purpose exclusively. The dramatic incident of this period was the gold panic on Black Friday in September, 1869, when a combination of several unscrupulous speculators, among them James Fisk, Jr., and Jay Gould, attempted to corner and put to extravagant figures the gold supply of the market. Operations on the Stock Exchange proper at that time were largely made up of the personal struggles of rival capitalists, notably in connection with the Erie and New York Central railroads.

The completion of the Pacific Railway (1869) caused extensive speculation in shares of the two transcontinental railways, and as capital increased and the railway mileage of the country extended the transactions of the Exchange became of a national rather than provincial character. The leading operators of that time were Gould, Fisk, Daniel Drew, Cornelius Vanderbilt and their associates. None of the capitalists named was accustomed to trade personally on the Stock Exchange; indeed, such a practice has always been the rare exception among active financiers.

To be continued: Stock Exchange Information Prior to 1901 (3)

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