Page:The New International Encyclopædia 1st ed. v. 18.djvu/676

STOCK EXCHANGE. 580 STOCK EXCHANGE. London capitalists for the placing of their public loans. To this class of securities were later added railway shares. After 1888 stocks of incorporated industrial enterprises, and more recently of mining and exploration companies, grew into high favor, the Stock Exchange merely acting as the medium for the transfer of such shares from the hands of the capitalists behind the enterprise to those of the general public. The New York (Stock Exchange devoted itself during most of its history almost exclusively to securities of railway enterprises, even the dealing in United States Goernment bonds and in other American public securities being chiefly conducted outside of the Exchange. In recent years, how- ever, along with the development of the London movement of industrial incorporation, the New York Stock Exchange has been largely utilized for the exploiting of shares of American companies of this nature. This movement, which flagged during the hard times of the early nineties, was renewed in enormous volume during the great 'boom' in trade which followed 1897. In the course of this time listing of industrial se- curities on the New A'ork Exchange attracted an immense business to that branch of its activi- ties. The New Y'ork Stock Exchange has never dealt to any noteworthy extent in foreign securi- ties, thereby reflecting the general tendency of American investors. Even the large purchases of British consols by American bankers during the Exchequer's loan issues of 1900, 1901, and 1902 were disposed of privately, and were never allowed a place in the formal trading of the Stock Exchange. There has been some rather notable diversity in the business of the New Y'ork Exchange and other American exchanges. For example, the Philadelphia Stock Exchange has long been noted as the market for various street-railway securities. This was because Philadelphia cap- italists had interested themselves particularly in that form of investment. For similar reasons the Boston Stock Exchange, though not an or- ganization which commanded the resources and capital of New Y'ork. monopolized for many years, and largely controls now, the trading in shares of copper-mining companies. Stock exchanges of Continental Europe have in general devoted themselves to transportation enterprises of their own countries, to their own Government's securities, and to securities of other European governments which came to those markets to raise capital. ]Iore recently the stock exchanges of Paris. Berlin, and Vienna have followed London's example in taking up on a large scale shares of incorporated indus- trial enterprises. This has been particularly true of Berlin, where the iron industry has been extensively exploited in this form. History. Stock exchanges as an institution had their origin at the time of the creation of public debts on the modern plan, at the close of the seventeenth century. The incorporation of the East India Company in London further developed the possibilities of the raising of pub- lic capital for corporate uses through the me- dium of stock-exchange trading. In 1720 the enormous public speculation in the shares of the South Sea Company in London and of the Mis- sissippi Company in Paris brought stock-trading to a height never before conceived of. No city at that time, however, possessed a stock ex- change in the sense now attached to the term. In London transactions in stocks were conducted through stock brokers, whose headquarters were at Jonathan's and Garravvay's Coll'ee Houses in 'Change Alley. There does not appear to have been any formal organization among these brok- ers. Addison in the Spectator speaks humorous- ly of having been taken for one of their number by the stock-jobbers at Jonathan's. The Lon- don Stock Exchange Building was not erected until 1801 ; the Paris Bourse not until 1826. The New York Stock Exchange nu'uibership, even after it had become a formal organization, con- ducted its business in hired rooms until Decem- ber, 1805, when the building was erected on Broad and Wall Streets, which has been replaced by the new structure on the same site, dedicated in April, 1903. The history of stock exchanges is very largely a mirror of the financial history of the community in which they are situated. The New York Stock Exchange ro.se to a posi- tion of real prominence only after the Civil War. Even at that time the fact that it did not deal in gold as a commodity threw a great part of the community's highly speculati'e business over to the Gold Exchange, which was formed for that purpose exclusively. The ilramatic inci- dent of this period was the gold panic on Black Friday in September, 1869. when a combination of several unscrupulous speculators, among them James Fisk, Jr., and Jay Gould, attempted to corner and put to extravagant figures the gold supply of the market. Operations on the Stock Exchange proper at that time were largely made up of the personal struggles of rival capitalists, notably in connection with the Erie and New York Central railroads. The completion of the Pacific Railway (1869) caused extensive speculation in sliares of the two transcontinental railways, and as capital increased and the raihvay mileage of the country extended the transactions of the Exchange be- came of a national rather than provincial char- acter. The leading operators of that time were Gould, Fisk, Daniel Drew, Cornelius Vanderbilt, and their associates. None of the capitalists named was accustomed to trade personally on the Stock Exchange; indeed, such a practice has al- ways been the rare exception among active financiers. The crisis of 1873 was felt in its full force on the New York Stock Exchange, which was obliged to close for two days at the height of the panic in order to stem the tide of liquida- tion in securities. With the great trade revival which followed the resumption of specie pay- ments and the profitable grain harvests of 1879 the New York Stock Exchange entered upon a pe- riod of renewed activity. During the year 1880, which marked the climax of the 'boom' of that period, trading on the Exchange reached an enor- mous volume, and the value of seats in the Stock Exchange rose to an unprecedented figure. In 1S81, when a reaction in the tide of prosperity began, the New Y'ork Stock Exchange reflected the change by a contraction in the volume of business done and by an extensive fall in prices. Speculation by the general public was again rife in 1882. but was checked with great violence by the sudden fall in railway and industrial profits at the close of the year. The severe reaction of 1883 was followed by the panic of May, 1884,