What Does Buttonwood Agreement Mean
The Buttonwood Agreement is the founding document of today`s New York Stock Exchange and one of the most important financial documents in U.S. history.  The agreement organized securities trading in New York and was signed on May 17, 1792 between 24 brokers outside 68 Wall Street. According to legend, the signature took place under a platanus occidentalis, a wood tree, but this tree may never have existed.  The New York Stock Exchange celebrated the signing of this agreement on May 17, 1792 as its creation.  According to Peter Asch, the historian of the New York Stock Exchange, the business they were doing at the time was what was to be considered a commodity trade. In the late 1700s, the available shares were limited to insurance companies, the Bank of New York, the First Bank of the United States and the Hamilton Bonds decided by Alexander Hamilton for the issuance of American debt during the War of Independence. (The system was considered risky and criticized for enriching the rich.) The agreement created confidence in the system in which brokers and traders acted only among themselves, while representing the interests of the public. By closing the system, participants would be assured that they can trust each other and that the payments are rewarded and that the investments are legitimate. There`s been a lot of speculation that it all started under a tree.
A tree with buttons, to be precise. The Buttonwood Agreement was signed in 1792 between 24 Wall Street brokers and traders in New York to create a stock exchange. Rumor has it that the deal happened under a button tree marked the beginnings of the Wall Street investment community. The agreement was an attempt to establish, after the financial panic of 1792, certain rules on which there were no rules or guarantees and many transactions were refused. The panic had been caused by the actions of speculator William Duer, who borrowed loans to do business until he realized he could no longer borrow. www.investopedia.com/terms/b/buttonwoodagreement.asp Long before the One World Trade Center overlooked Lower Manhattan, an American tree from Sycamore or Buttonwood to Wall Street was the highest thing in the area and the mall. 225 years ago, on May 17, 1792, 24 brokers and traders under the same tree signed the so-called Buttonwood Agreement, which set the trading parameters in the first incarnation of the New York Stock Exchange. “He bet that the market would go down, while everyone else is betting it was going to go up,” as economic historian Robert E. Wright says, until he runs out of money. “He stops paying, so everyone has his money and starts to wonder who borrowed Duer and whether these people would make their payments.” The situation was similar, Wright adds, to what happened more recently when Lehman Brothers went bankrupt and people began to wonder who the company owed money to. So people panicked and started selling.
The more they sold, the more prices fell, which made people even more panicked – until Alexander Hamilton worked with first Bank of the United States to stop the panic. They agreed that they would only trade with each other and represent the interests of the public, which meant that the trust they had in each other was the confidence they had in the market. In other words, they would not have to worry about selling bad shares or competing on commission rates, so the invoiced prices would reflect the value of the stock, and not just any other factor.