-
Buttonwood Agreement
The Buttonwood Agreement is the founding document of what is now New York Stock Exchange and is one of the most important financial documents in U.S. history. The agreement organized securities trading in New York City and was signed on May 17, 1792 between 24 stockbrokers outside of 68 Wall Street. -
Telegraph
The first major technological invention came in 1832, when Samuel Morse invented the telegraph. This was a major achievement in communications, culminating in the appearance of the first financial newsletters. -
Western Union
People from cities and towns outside of Wall Street were able to place orders and buy and sell securities. Telegraph didn't create much new business for New York brokers because a person from outside of the city would have to know exactly what he/she wanted to buy or sell prior to making the transaction, making it inconvenient. Western Union and a few other telegraph companies recognized this problem and began working on a continuous telegraph apparatus, which would print current stock prices. -
Quotation Device for Gold Prices
S.S. Laws invented the first successful quotation device for gold prices. It was a simple machine, which printed the prices on a continuous basis and in less than a year; there were fifty of them around the city. Just one year later, E.A. Calahan, improved the gold quote machine and dubbed it a "ticker." -
The Ticker
E.A Calahan adapted the "ticker" to handle stock quotations as well and began to offer it to Manhattan brokerages for $25 a month. When Thomas Edison finally perfected his ticker, he sold it for $40,000. The ticker overcame the single biggest obstacle to the transmission of information, which was the geographical barrier. With this one apparently small minor invention, investors anywhere could finally have up-to-date information for a relatively insignificant cost. -
Technology Increases Volume
n February 11, 1929 a central quotation system for reporting bid and asked prices was inaugurated at all NYSE trading posts and on September 2 a new high-speed ticker service was initiated. Clearly these two improvements were helpful ones, but they both really only served to increase the volume of transactions -
Instinet Founded
Instinet is founded as the first Electronic Communication Network (ECN), which was created to allow brokers to post offers to buy and sell stocks after regular market hours -
May Day
Fixed commissions are abolished by the SEC. This allowed for the rise of discounted commissions and facilitated the growth of Charles Schwab and others. -
Designated Order Turnaround (DOT)
NYSE introduces its Designated Order Turnaround (DOT) system, which allowed brokers to route 100-share order directly to specialists on the floor. These were not true electronic executions because the specialist still matched the orders, but it did bypass floor brokers. -
Super DOT
NYSE adopts a more sophisticated Super DOT system that allows orders up to 100,000 shares to be routed directly to the floor. More floor brokers cut out. -
Black Monday
U.S. markets fall more than 20% in a single day. Blame the computers. The crash is blamed partly on "portfolio insurance" (shorting stock index futures against a stock portfolio). Expanded to the Small Order Execution System (SOES), which allows dealers with small trades to enter their orders electronically rather than over the phone. This was done because during the 1987 crash many broker-dealers simply stopped answering their phones. It was the death knell for executing most orders by phone. -
Tick Sizes
Stock trading is allowed in increments of one-sixteenth of a dollar, down from one-eighth of a dollar. -
Pennies on the Dollar
Stock trading in pennies begins. -
NYSE Introduces Direct+
Provided immediate automatic execution of limit orders up to 1,099 shares. This is real electronic trading (automated matching of buy and sell orders) and was the beginning of the end of the old floor specialist system. -
Regulation NMS
The SEC consolidates all rules on the national market system into Reg-NMS, which forced the NYSE to go electronic. By mandating market-wide cross-connectivity, NMS fostered the growth of competing ECNs and exchanges. The centrality of the SIP ensured that all participants knew where and what price the best bid and offer for each stock was at all times. This meant that customer orders were filled at the best prices available, regardless of what exchange each stock is trading on. -
NYSE Demutualizes
The NYSE became a for-profit, publicly traded company. This gives the exchanges an incentive to start managing for profit and the brokers incentive to start more competition. NYSE responded by acquiring Archipelago, an all-electronic trading platform. ECNs allow for automated trading, passive order matching, after-hours trading, and instantaneous order execution. Some feared this was the end traditional floor trading, more specifically, the open outcry auction system. -
2010 Flash Crash
Wiped out more than a half trillion dollars in equity value in minutes. Shares of Dow component Procter & Gamble, the ultimate defensive blue-chip stock, dropped more than 33% in a matter of minutes before recovering almost as quickly. By the time the dust settled, a whopping 19.3 billion shares had changed hands, more than twice the average daily U.S. equity market volume this year and the second-biggest trading day ever. -
Surprise Technical Glitch Causes Shutdown
The exchange halted trading for nearly four hours due to technical issues that were initially suspected to be the result of a cyber-attack.
No evidence of the cyber-attack was found. Instead, the shutdown was blamed on a software update that was released with the wrong configuration. Regardless, this shutdown rattled investors. Not only does it point to the risk of using technology for trading, it also sent cybersecurity companies higher because of the cyber-attack fears. -
Technical Problems still Occur!
A technical problem forced a full-day trading halt on Japan's stock exchanges, including the popular Nikkei 225 index on Thursday. The shutdown happened when a backup system failed to kick in after a hardware malfunction, according to the Japan Exchange Group.
