Governance Issues at the New York Stock Exchange



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Background Note

The history of the NYSE dates back to 1792 when the Buttonwood Agreement was signed by 24 New York-based stockbrokers and merchants. The agreement facilitated trading in securities between the signatories on a commission basis.In 1817, a formal organization - the New York Stock & Exchange Board (NYS&EB) was formed by brokers; the board also formulated rules and a constitution for conducting business.

By 1824, the NYS&EB's annual trading volume had reached 380,000 shares and by 1835, the daily trading volume had increased 50-fold to 8,500,000 shares. By the 1850s, the NYS&EB had started formulating rules and regulations for listing companies. In 1853, the listing standards were formulated, and these made it mandatory for listed companies to provide complete information about outstanding shares and capital resources.

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In the late 1850s and early 1860s, the NYS&EB witnessed a turbulent period. In 1857, there was a sharp downward movement in trade due to the collapse of the Ohio Life Insurance & Trust Company.The NYS&EB registered a 8-10% price decline in a single trading session and by year-end, the decline stood at 45%. In 1863, the NYS&EB changed its name to the New York Stock Exchange (NYSE).In the following year, a Committee on Stock List was appointed to oversee the listing of new securities on the exchange, thus initiating supervision and controlling of listing policies by the NYSE. With the increase in trading volume, the NYSE introduced innovative methods for making trading more convenient........

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