The Buttonwood Agreement: A Historic Moment for the American Stock Market
The American Stock Exchange (AMEX) is one of the oldest stock exchanges in the world, and its foundation was built on a historic agreement known as the Buttonwood Agreement. This agreement took place over 225 years ago on May 17, 1792, under a buttonwood tree on Wall Street in New York City, by a group of 24 brokers and merchants who were looking to establish a regular venue for trading securities in the United States.
The agreement was named after the buttonwood tree under which it was signed, and it created the foundation for the formation of the New York Stock Exchange (NYSE). The agreement was signed by these founding members to establish a set of rules and regulations for trading securities in a fair and organized manner, and to create a system of trust between buyers and sellers.
The Buttonwood Agreement was the first step towards developing a formal stock market in the United States. Prior to its establishment, trading of securities was done on an informal and unregulated basis among merchants and brokers in coffeehouses, taverns, and other public places.
The agreement addressed several key aspects of trading securities, including a commitment to deal only with each other, to charge a maximum commission of 0.25%, and to provide a guarantee of liquidity to other members in case they had liquidity shortages.
The Buttonwood Agreement also established trading hours, which were from 10 a.m. to 3 p.m., and a set of guidelines for the trading of securities in a fair and transparent manner. This helped to promote investor confidence, leading to an increase in the number of investors participating in the stock market and the value of securities traded.
The Buttonwood Agreement paved the way for the establishment of the New York Stock Exchange in 1817, located at 11 Wall Street. Although the original agreement applied only to securities, it played a significant role in the development of other financial markets, such as the bond market and futures market.
Today, the New York Stock Exchange is the largest stock exchange in the world, with over 2,800 listed companies and a market capitalization of over $25 trillion. The Buttonwood Agreement, although over two centuries old, remains an important event in American financial history, reminding us of the power of cooperation and trust in advancing our economy.