Chapter 5: Disability, Long-Term Care, and Life Insurance | Article

History of Insurance—Stocks and Securities

The Dutch East India Company was the first company to allow outside investors to purchase shares of the company in return for a fixed percentage of the company's profits. It was also the first company to issue stocks and bonds to the general public. The year? 1602.

A stock exchange is where investors can buy and sell shares of public companies, known as stock. The stock exchange system in the US began with an agreement among 24 stockbrokers under a buttonwood tree in 1792. The tree was a regular meeting place for stockbrokers in those days. The agreement, known as the Buttonwood Agreement, later became the New York Stock and Exchange Board. In 1863, the name was shortened to the New York Stock Exchange (NYSE). It was a members-only organization until 2006.

In 1792, only five securities were traded in New York. Securities are simply ownership or debt that can be bought or sold. Three of the securities were government bonds. This was how the colonial government financed the Revolutionary War. The two other securities were bank stocks, which were also issued to pay off war debts.

The first company listed on the exchange was the Bank of New York. Soon, companies began to see the NYSE as an important way to grow their businesses with investor funds. By 1886, the NYSE was trading a million shares a day. By 2001, daily trading hit two billion shares.