The History of the American Stock Market (Part II)

In Part I we looked at the beginnings of debt markets, and the early days of company stock ownership and trades. The 20th Century saw huge changes in the world’s economies, political systems, and population growth. The History of the American Stock Market both reflects these changes and used them to develop into what we see today. Next we will explore the New York Stock Exchange, NASDAQ, and S&P 500.

The New York Stock Exchange

As we saw in Part I, what was called the New York Curb Market moved indoors into a new building on Greenwich Street in Lower Manhattan. By now, it had established codes of conduct and listing requirements. By 1930, despite the Great Crash of 1929, The Curb Exchange was the world’s leading stock market, and listed more foreign issues than all of the other U.S. securities markets combined.

Radio was developing, and in the 1950s, Radio Amex began to broadcast stock prices and market changes so investors and traders could have up-to-the-minute information. Between 1950 and 1960, the share value traded on the American Stock Exchange had more than doubled to $23 billion.

In 1971, the NYSE and Amex brought many of its informational and other services together to form the National Securities Industry Automation Corporation, or SIAC. One result of such a development was educational services on, for example, options trading. Trading stocks had become a much more complex process, so the intention was to help investors learn more about markets and make more informed decisions.

Trading options and futures are two such examples. Options give buyers and sellers the right, should they choose, to trade an asset at a given price at some point during the life of that contract. Futures trading is similar, but buyers and sellers must trade at that price. Making profitable decisions now about what someone may or must do in the future demanded reliable information.

In 1993, Amex introduced derivative trading. A derivative is a security whose price is based on and depends on or is derived from, the value of underlying assets. These underlying assets include stocks and bonds, commodities, currencies, interest rates, and overall market indices.

In 2008, Amex was bought by and merged with NYSE Euronext. Euronext was a European stock exchange that traded in cash and the derivatives markets. It also produced market data for traders to use. The world, indeed, became more accessible when these major exchanges and market analysts merged across the two continents.

NASDAQ

“NASDAQ” stands for the National Association of Securities Dealers Automated Quotations System. Beginning in 1971, it was the first electronic exchange, where investors could buy and sell online, without having to meet on a trading floor. NASDAQ is, today, a world-wide provider of financial technology information and trading services. It operates in 26 countries around the world. NASDAQ’s online services have enabled the world’s stock markets to evolve dramatically. Because it is an all-electronic service, it attracted companies such as Apple, Microsoft and Dell.

Today, NASDAQ services many thousands of clients and publishes approximately 41,000 global indexes covering all kinds of industries and market sectors. This data enables trading professionals to analyze markets in detail and to advise their clients accordingly.

NASDAQ major business segments all use its technology and software to generate and publish the data. The technology then enables approximately 3,100 companies, representing approximately $10.1 trillion in market valuation, to list with NASDAQ. The listings bring buyers and sellers together so they can trade in the many different asset classes offered. As a result, the NASDAQ Stock Market is the largest single pool for trading in US equities.

S&P (Standard and Poor’s)

The company began as the Standard Statistical Company in 1923, when its indicator included only 233 publicly traded companies. It merged with Poor’s Publishing in 1941, resulting in the index showing 416 companies.  It was on January 1, 1957 that it hit the famous 500 mark.

It is, now, an index that tracks the value of 500 large companies, currently representing approximately $7.8 trillion of corporate valuation, that are listed on the NYSE and on NASDAQ, hence “S&P 500.”

S&P now does more than publish corporate indices. It also publishes indices on small, mid, and large cap companies and groupings including the S&P Composite 1500, and the S&P 900. It also publishes financial market intelligence across the world, and calculates credit ratings for companies, cities, states and provinces, and entire nations.

Final Comment

The history of the American stock market is rich in fact and action. It enables individuals, institutions, and corporations to invest, raise capital, spread risk, and to speculate on individually listed corporations as well as on company groups and entire market sectors.