Stockbroker 101 – A Cool History


The first recorded semi-organized buying and selling of shares began in Rome around the time of Julius Caesar in the second century BC. Six hundred years later, Rome fell – and so did markets. In fact, they fell to zero and ceased to exist for 1,000 years. Talk about a bear market! Warren Buffet often says, “Buy shares that you don’t mind holding if the market were to close tomorrow.” This post Roman period might have exceeded even Warren’s renowned long term view. After the end of Rome and stockbroking as a realistic career, not much seems to have happened until the beginning of the Renaissance when gov’t bond trading began in mercantilist city states on the Italian peninsula, like Venice and Genoa. Trading in shares of mines and ships also began around that time in N. Europe as a way of accumulating capital – and diversifying risk.

Put that Horse Away, We Don’t Herd “Stock”

Stocks are pieces of paper representing ownership in a commercial enterprise, like a company. They are traded, or bought and sold, in a stock exchange (or under a tree, read on). One of the oldest stock exchanges still functioning is the London Stock Exchange which can trace its history back to “Jonathan’s Coffee Shop” in 1698. Much like an urban Starbucks today, Jonathan’s attracted moneyed clientele with time on their hands and these customers were eager to share information and trade things.

Interestingly, although we now recognize tea as the main beverage anytime day or night in the UK, it was coffee that first became popular in England and coffee houses spread across the urban landscape from the mid-1600s onward. Tea only replaced coffee as the quintessential “English” drink once England replaced maharajas in India and made it a full colony one hundred years later.

Bond, James Bond

Anyway, back to entrepreneurial Jonathan; recognizing an opportunity, caffeinated Jonathan energetically compiled a list of prices for stocks and commodities, such as they were, that ensured his coffee shop remained the center of financial trading for 75 years.

Eventually outgrowing these humble digs, “brokers” pooled their money to construct a building nearby in Sweetings Alley which became known as “The Stock Exchange.” In 1801, the LSE became a regulated exchange. Importantly for a British organization, years later in 1923 the LSE received its own Coat of Arms after having tea with the Queen (oh dear) and was awarded the motto: “Dictum Meum Pactum” (“My word is my bond” – even though they trade stocks….).

And the Colonials?

In the US also around 1800, the first regulated exchange was established in the home of cream cheese and Rocky Balboa, and became known as “The Philadelphia Stock Exchange.” Despite moving the trading floor 8 times over the last 100 years, the PSE has nevertheless become an important exchange for equity options trading.

No matter, the really important stock exchange is the venerable New York Stock Exchange which was founded in 1817 and is the largest exchange in the world, trading over 80% of the S&P 500 companies for a total market capitalization of around US$ 14 trillion, with average daily trading value of US$150 – 200 bn. Also known as the “Big Board,” the NYSE traces its original roots (no pun intended) back to a Buttonwood tree, under which 24 brokers signed an agreement establishing rules of trading in 1792. This became known as the “Buttonwood Agreement” and held sway until the first constitution of the regulated exchange was drafted in 1817. Until that time, however, brokers would meet under that tree to conduct business.

Like Snow in Miami

Not only is this hard to imagine considering the four very distinct seasons in New York, I have never heard of nor seen a “buttonwood tree” in New York, so I looked it up. Yep, a buttonwood tree (conocarpus erectus) is like a mangrove tree, ie, it is a shrub with low branches, so these brokers must have been very short. Also, the buttonwood tree grows in the tropics and is not found north of Florida today so there must have been incredible global warming back in the 1700s. I guess it came with increasing use of horses for mass transit?? Al Gore, any comment here?

Finally, no matter what kind of tree, who the hell wants to stand out in the rain and trade shares? Talk about dedication! You wouldn’t get any brokers I know out there on a dark and stormy November morning braving the elements in raincoats whispering, “Shares? Ya want any shares?

The Ultimate Question: One Word or Two?

Now that we have looked at exchanges, what about the word “stockbroker”? Is it “stockbroker” or “stock broker”? “Stockbroking,” or “stock broking”? I have seen it written as two words or combined as one just about everywhere. I prefer using it as one word: I am a stockbroker. I live and breathe stockbroking. This website, by the way, is “Stockbroking101.com;” one word.

(For non-Americans, “101” is a term used in American colleges and universities after a course title to indicate it is the first level of that course. After passing “English 101,” you would go on to take “English 201,” etc).

Peace, Love and Stockbroking

Yet, my Microsoft Windows program underlines in red the word “stockbroking.” It prefers “stock broking.” Looking to a higher authority than Bill Gates, Webster’s Dictionary confirms it is ONE WORD and that word is not peace or love but “stockbroker” and “stockbroking.” Wondering if there was a difference across the pond in the UK where they invented the damn language, I also checked the oracle of all things English, the Oxford English Dictionary. You never know, weird linguistic things happen. For example, they call corn “wheat” in England (“Wheat on the cob, anyone?”) and a canoe is a kayak. Both are patently wrong but we don’t need to rub it in. Yes, the OED also confirms we are “stockbrokers” engaged in “stockbroking.” So the matter is settled: one word please.

Like a really bad rash, stockbrokers have been in existence, off and on, now for over 2,000 years. Despite recent market upheavals and gut-wrenching change in the wings for the financial world as we know it, I think it is safe to say the career of stockbroking will outlast us all.

 

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