Knowledge Canteen

Understanding the Stock Market The stock market allows buyers and sellers of securities to meet, interact, and transact. The markets allow for price discovery for shares of corporations and serve as a barometer for the overall economy. Buyers and sellers are assured of a fair price, high degree of liquidity, and transparency as market participants compete in the open market. The first stock market was the London Stock Exchange which began in a coffeehouse, where traders met to exchange shares, in 1773. 3 The first stock exchange in the United States began in Philadelphia in 1790. 4 The Buttonwood Agreement, so named because it was signed under a buttonwood tree, marked the beginning of New York’s Wall Street in 1792. The agreement was signed by 24 traders and was the first American organization of its kind to trade in securities. The traders renamed their venture the New York Stock and Exchange Board in 1817. 5 A stock market is a regulated and controlled environment. In the United States, the main regulators include the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). 2 1 The earliest stock markets issued and dealt in paper-based physical share certificates. Today, stock markets operate electronically.