Tricks of the Trade

1792: BIRTH OF THE NEW YORK STOCK EXCHANGE

Twenty-four brokers and merchants assemble on Wall Street to sign the Buttonwood Agreement and begin trading securities on a commission basis.

1867: ARRIVAL OF THE TICKER

Invented by Edward A. Calahan, the new device transforms the stock market by making current prices available to investors far from Wall Street.

1871: RISE OF FLOOR SPECIALISTS

To foster continuous trading, the NYSE adopts a system of brokers responsible for particular stocks who remain at set locations on the floor.

1878: INSTALLATION OF TELEPHONE

Two years after Alexander Graham Bell's first successful tests in Boston, the stock exchange improves communication with its first phone.

1923: FRAUD BUREAU ESTABLISHED

Early in the Roaring Twenties, the NYSE establishes an office to sniff out gamblers who bet on the rise and fall of the stocks and undermine investor confidence.

1929: BLACK TUESDAY JOLTS THE MARKETS

On Oct. 29 the Dow Jones index falls more than 11 percent, erasing some $8 billion in value; during the Great Depression, stocks decline 89 percent.

1934: SECURITIES & EXCHANGE COMMISSION FORMED

The agency's two primary purposes are providing investors with greater disclosure and policing fraud in securities sales.

1961: FRAGMENTATION FEARS SURFACE

Congress authorizes the SEC to study the decentralized over-the-counter market; the agency suggests improved automation.

1966: TRADING FLOOR AUTOMATED

After years of hesitation, the NYSE moves into the age of computerization; human traders continue to make all crucial decisions.

1971: NASDAQ LAUNCHES OPERATION

The National Association of Securities Dealers starts its automated system with median quotes for 2,500 over-the-counter securities; NYSE now has real competition.

1975: FIXED COMMISSIONS ABOLISHED

The SEC bans fixed minimum commissions on trading, after which rates fall dramatically and volumes surge.

1982: NYSE HAS FIRST 100-MILLION-SHARE DAY

Fourteen years later, Big Board trading volume reaches 1 billion shares during a single day; that figure tops 2 billion by 2001.

1982: NATIONAL MARKET SYSTEM ESTABLISHED

The NMS is launched to provide up-to-the-minute information on Nasdaq's 40 highest-volume securities.

1984: SMALL ORDER EXECUTION SYSTEM BEGUN

SOES automatically executes small orders against the best quotations, increasing efficiency and volume; "SOES bandit" arbitragers game the system.

Mid-1980s: SPREAD OF PROGRAM TRADING AND PORTFOLIO INSURANCE

Program traders use software to buy or sell portfolios of securities in a single order while making offsetting bets on futures; portfolio insurance is sold as a risk management tool.

1987: BLACK MONDAY SHOCKS THE MARKET

Dow Jones drops 508 points, or 23 percent, on Oct. 19, the greatest one-day decline in history; program trading and portfolio insurance are contributing factors.

1987: RISE OF THE CROSSING NETWORK

Two months after the October crash, Reuters subsidiary Instinet establishes an electronic platform to match institutional orders at the closing price on NYSE and Nasdaq.

1996: A HUMAN-FREE NETWORK

Island ECN is founded as the first all-electronic communication network without market makers; brokerages enter a trade into the computer, and if it matches an available order, stock is bought or sold.

1998: UPSTARTS ARE UNLEASHED

SEC adopts Regulation Alternative Trading Systems, which encourages the formation of new electronic trading systems that compete with NYSE and Nasdaq.

2001: DECIMALIZATION BECOMES THE RULE

The move in 2001 to list prices in pennies rather than dollar sixteenths cuts the gap between bid and ask quotes and reduces profits for market makers.

2005: MORE COMPETITION

SEC acts again, with Regulation National Market System, which aims to provide customers with best prices by fostering yet more competition among markets.

2008-present: HIGH-FREQUENCY TRADING MUSHROOMS

Hedge funds and proprietary trading firms use superfast computers to profit from massive trades taking advantage of price discrepancies among exchanges.

5/6/2010: AN AFTERNOON OF VERTIGO

The Dow momentarily falls 9.2 percent, the largest intraday plunge since 1987; factors include high volumes of computerized trading triggered by a European debt crisis.

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