The Philadelphia Stock Exchange (PHLX) is the oldest stock exchange in the United States. Located in Philadelphia, Pennsylvania, it was founded in 1790. It merged with the Baltimore Stock Exchange in 1949 and the Washington Stock Exchange in 1954. Independence Hall Philadelphia (sometimes referred to as Philly or the City of Brotherly Love) is the sixth-most-populous city in the United States and the most populous city in the state of Pennsylvania, occupying all of Philadelphia County. ... State nickname: The Keystone State Other U.S. States Capital Harrisburg Largest city Philadelphia Governor Ed Rendell Official languages None Area 119,283 km² (33rd)  - Land 116,074 km²  - Water 3,208 km² (2. ... 1790 was a common year starting on Friday (see link for calendar). ... City nickname: Charm City Location in the state of Maryland Founded 30 July 1729 County Independent city Mayor Martin OMalley ( Dem) Area  - Total  - Water 1,214. ... 1949 is a common year starting on Saturday. ... Aerial photo (looking NW) of the Washington Monument and the White House in Washington, DC. Washington, D.C., officially the District of Columbia (also known as D.C.; Washington; the Nations Capital; the District; and, historically, the Federal City) is the capital city and administrative district of the United... 1954 was a common year starting on Friday (link will take you to calendar). ...

On October 22, 1981, trading was halted on both the Chicago Board of Trade and the Philadelphia Stock Exchange after anonymous callers said bombs had been placed in those buildings. October 22 is the 295th day of the year (296th in leap years) in the Gregorian Calendar, with 70 days remaining. ... 1981 is a common year starting on Thursday. ... The Chicago Board of Trade (CBOT), established in 1848, is the worlds oldest futures and futures_option exchange. ...

In 1791, hooves pounded and coaches lurched over the dirt highway near New Brunswick. "Not less than twenty expresses have passed through this city within one week, from New York to Philadelphia and back," a wondering newsman reported, "They travel with uncommon speed, from which it appears that something of great importance is carrying on..." The newsman hardly imagined that he was witnessing the origins of what would one day be the world's most efficient capital markets.

Philadelphia, the financial heart of the nation, in 1790 had established the first stock exchange in the United States; yet, New York, a more easterly port, was first to receive news as ships arrived from Europe. The speeding coaches that clattered from New York to Philadelphia carried speculators and stock-jobbers, agents of foreign investors, and inside traders with privileged information that could move the market, and make their fortune at the expense of the Philadelphia merchants.

The coups scored by these early commuters led a group of Philadelphia brokers to set up signal stations on high points across New Jersey. The signalmen watched through telescopes as coded flashes of light brought news of stock prices, lottery numbers and other important information. Relayed from station to station, the information could move from New York to Philadelphia in as little as 10 minutes, more quickly than any coach horse could run, so the system sharply narrowed the advantage of New York speculators. It remained in use until the arrival of the telegraph in 1846.

Such bold strokes of innovation have characterized the Philadelphia Stock Exchange from its inception. The official organization of the exchange in 1790 came after forty-four years of effort. Colonial Philadelphia's mayors had traditionally closed their term of office with lavish entertainment, but in 1746, Mayor James Hamilton broke with tradition.

The following extract from the minutes of an October 7, 1746 meeting of the Philadelphia Board of Aldermen explains why: "James Hamilton, Esq., Mayor, represented to the board that as it had been customary for the mayors of this city, at the going out of their office, to give an entertainment to the gentlemen of the corporation, he intended in lieu thereof, to give a sum of money equal at least to the sum usually expended on such occasions, to be laid out in something permanently useful to the city and proposed the sum of one hundred and fifty Pounds toward erecting an exchange or other public building."

Mayor Hamilton's sober exit from office started a new tradition. Over the years, the fund grew with donations from successive mayors. However, the Philadelphia merchants who stood to benefit most from an exchange eventually decided to start one without tapping the special fund, which ultimately went to build a new city hall in 1775.

Led by Robert Morris, Thomas Willing, Archibald McCall and Teach Francis, over two hundred Philadelphia merchants subscribed 348 Pounds to finance the opening of the London Coffee House in 1754 by William Bradford, a printer. The London Coffee House soon became the center of Philadelphia's business and political life. Sea captains, merchants, auctioneers, slave-traders and soldiers congregated here to do business and to talk politics. For many years, a portrait of King George hung on the Coffee House wall.

As English tax policies grew more oppressive, Philadelphia's merchants mobilized. Talk in the London Coffee House turned to politics and strategy. John Adams met here with Dr. Benjamin Rush and other advisors. The King's portrait came down. When the Declaration of Independence was signed a few blocks away, the business of the city changed to revolution. William Bradford left to serve in General Washington's army. Robert Morris, the "Financier of the American Revolution", made sure that Washington had the funds to feed and arm his troops. Morris was so well respected in Philadelphia that his word of honor was enough to secure immense war loans, even from the pacifist Quakers.

During Philadelphia's occupation by the British, the London Coffee House remained closed. The City Tavern, located at Second and Gold Streets, replaced it as the center of social and business life. Bradford returned in 1778 after the British had departed. He attempted to re-establish the London Coffee House, but after two years of struggle admitted that he could not compete with the Tavern and left the business. For the next fifty years, the City Tavern, later re-named the Merchants Coffee House, functioned as the city's exchange.

As their activities became more complex, the securities brokers decided to distinguish themselves from other merchants. They did so by establishing an exclusive organization, the Philadelphia Board of Brokers, which was officially licensed in 1790. The first president, Matthew McConnell, had served in the French and Indian War and in the Revolution. Other members included James Glentworth, Clement Biddle, Andrew Summers, Jr., Thomas McEwen, George Eddy, Thomas Orr, William W. Biddle, Thomas Newman and James McCaragh.

In those days, the legal concept of a limited-liability corporation had not yet achieved wide acceptance. So it was not corporate stocks, but rather government and semi-government paper that traded on the exchange. Nonetheless, the public bought eagerly. For example, in 1791 promoters floated an issue of shares in the First Bank of the United States. Within a month, the shares quadrupled in price. Similarly, when the Schuylkill and Susquehanna Navigation Company offered 1,000 shares to the public at $400.00 per share, the issue was forty times oversubscribed, and a lottery was held to select lucky buyers.

The exchange also provided an efficient source of capital for needed public works. In 1791, a Middleton, Pennsylvania miller wrote, "Large quantities of wheat and other produce and flour manufactured here and which are to be forwarded by land, remain on hand for want of teams which are terrified by the bad and dangerous roads over the Conowago and other hills. This occasions that such produce will often come late to market."

Realizing that investors could provide the necessary capital if they had the assurance of payback, the legislature, on April 9, 1792, passed an act enabling the government to incorporate a company for making an artificial road from Philadelphia to Lancaster. The preamble to this act noted, "It is reasonable that those who enjoy the benefits of such a highway should pay a compensation." The Philadelphia and Lancaster Turnpike Company, the first turnpike in the United States, issued 1,000 shares at $300 per share. Subscriptions for 2,276 shares were received. The stock price rose to $1,000 within days.

The turnpike did a thriving business. One traveler reported, "It was scarcely possible to go one mile on the road without meeting numbers of wagons passing and re-passing between the back parts of the state and Philadelphia." The success of this turnpike made it easy to finance an extension, called the Lancaster and Susquehanna Turnpike, which was soon carrying heavy traffic and, within a few years, paying dividends of 5 1/2%.

Such projects depended on an efficient capital market. Fortunately, by 1792 securities brokerage had become a well-defined business in Philadelphia. In fact, the earliest known record of securities quotations in the United States is the "Price Current of Stocks," printed on three-by-six inch paper and signed by Samuel Anderson, Stock Broker, at Number 104 Chestnut Street, Philadelphia. It is dated April 10, 1792.

Investor interest in bank stocks was particularly strong in the early days of the exchange. Robert Morris and a few private investors had established the Bank of North America and dominated Philadelphia commerce during the 1780's. The stock exchange helped bring more competition into the market. The First Bank of the United States had issued its public stock in 1791 and was followed by the Pennsylvania Bank in 1793. The Philadelphia Bank opened in 1803, the Farmers' and Mechanics' Bank in 1807, and the Bank of Northern Liberties in 1809. Other financial issues included stock of The Insurance Company of North America, established in 1794, and one of the country's first purely life-insurance firms, the Pennsylvania Company for Insurance on Lives and Granted Annuities, chartered in 1812, also traded on the exchange.

The War of 1812 spurred the further development of both banking and insurance. The Congress authorized borrowing of nearly $17 million in treasury notes and almost $63 million in six and seven percent war loans. Across the country, 120 new banks were chartered. The Second Bank of the Unites States, later to figure in Philadelphia's most critical moment, received its charter in 1816. $28 million of the Second Bank's $35 million initial capital came from a public stock issue. The legendary Philadelphia merchant, Stephen Girard, by this time a major banker in his own right and among the most important channels for European investment in North America before the war, bought $3 million of this issue. Other bankers followed suit. Meanwhile, merchants were eager to purchase insurance on their maritime cargo, and life insurance caught on, so dozens of new insurance firms came to market with stock issues.

Manufacturing also prospered when the War of 1812 disrupted traditional trade links with Europe. Before the war, the United States had imported $54 million in goods from Europe, and exported $61 million. The last year of fighting, 1814 had slashed imports slashed to $13 million, while exports withered to only $7 million. The nation had to fend for itself. In 1812, there were fewer than 90 cotton mills in the United States, but by 1816 there were over 200.

After burning the capital at Washington during the war, the British set out to wreck the young United States' economy by "dumping" immense quantities of cheap manufactured goods through the port of New York when the shooting had stopped. Many of the new, domestic manufacturing firms folded. Those that survived became sharp competitors. Protected behind a tariff wall built by Congress in 1816, they made a reasonably smooth transition from war to peace.

The Philadelphia Stock Exchange remained the nation's premier capital market after that war. When the smoke had cleared, European investment capital returned to North America, and it chose to come through Philadelphia. The Second Bank of the United States and the Girard Bank provided liquidity to the Philadelphia market. The fledging exchange loosely organized under a buttonwood tree on Wall Street in New York had limped along since 1792. Recognizing that the success of the Philadelphia Exchange was due largely to its principles of organization, in 1817 the New York brokers sent young William Lamb to learn what he could about how the Philadelphia Stock Exchange worked. Lamb, just married, postponed his honeymoon in order to make the trip. He came back with enough notes that the New York brokers could draw up a constitution, which was almost an exact copy of the charter of the Philadelphia Exchange. Their new organization was called the New York Stock and Exchange Board.

A turning point in the evolution of the Philadelphia Exchange came with the construction of the Erie Canal, begun in 1817, which eventually would allow New York to take the lead from Philadelphia in the commercial life of the nation. However, all of the nation's stock exchanges prospered during the 1820's, thanks largely to the canal mania. President John Quincy Adams (1825-1830) put the weight of the government behind such public works; Philadelphia, Boston, New York and Baltimore all traded shares in the canals. The Chesapeake and Delaware Canal Company brought its first issue to the Philadelphia Stock Exchange in 1823, followed by the Susquehanna and Juniata Canals in 1829.

Due in part to the canal boom, the exchange itself had become such an institution in the city that it merited its own quarters. Stephen Girard's Bank formed the Philadelphia Merchants Exchange Company in 1831. William Strickland, the architect, designed the Philadelphia Stock Exchange Building on classical Greek models. Built almost entirely of Pennsylvania marble, the exchange building opened for business in 1834. It may have received more praise for its beauty than for its business, because the economy and markets were teetering toward the great Panic of 1837.

The boom was not to last forever. By the late 1830's state debts for canals and other projects had reached insupportable levels. In fact, a number of states could only pay their old debts with new borrowings. Investors in Europe stopped taking this dubious paper, and states defaulted on borrowings, severely damaging the credit of the nation. Meanwhile, the banking system was on the edge of collapse. President Jackson had defeated Nicholas Biddle and the financial establishment of the country in 1832 when he vetoed the re-charter bill for the Second Bank of the United States. Until that point, the Second Bank had functioned for practical purposes as the nation's central bank. The president's victory came at the expense of discipline in the banking system. Government attempts to re-introduce discipline through control of the money supply overshot their mark. By 1837, the economy had all but collapsed.

The 1840's brought slow but certain improvement. Philadelphia never re-gained financial preeminence in the United States, but it prospered, thanks to new technologies. For example, in 1828, at the peak of canal fever, ground had been broken in Maryland for the Baltimore and Ohio Railroad. It was not long before rail stocks became the sweethearts of the Philadelphia Stock Exchange. The railroad boom got up a new head of steam after the Panic of 1837 had subsided, launching a new wave of securities speculation and investment. The era of railroad building lasted from about 1835 to 1855.

As construction of inter-city rail lines slowed down, the Philadelphia Stock Exchange brought out new issues of shares in railroads built for what would now be called mass transit purposes. The first streetcar line in Philadelphia, operating on Fifth and Sixth Streets, opened in January 1858. It was so successful that 14 more such companies were immediately chartered. The masses may have been riding, but the speculators were off and running. When the Thirteenth and Fifteenth Streets Passenger Railway came to market on May 9, 1859, men lined up all night for a chance to buy, and fistfights broke out over spots in the queue.

Meanwhile, investors benefited from an astonishing advance in telecommunications technology: the telegraph. The Philadelphia Stock Exchange introduced this technology in 1846. The telegraph brought a new openness to the business of the exchange. By 1851, daily reports of transactions were printed and distributed shortly after the close of the market.

The turbulence of the nineteenth century must have led to some rowdy times on the exchange floor. Most of the revenue of the exchange came from fines levied on members who broke the exchange's code of civility and common decency. This code and the fines to be levied for each offense were spelled out in detail. For example, addressing the chair with one's mouth full called for a fine. Profane language called for a fine of $1.00. If any member said the word "devil," it cost him $1.00. Winding the clock without the permission of the president was more serious S a $5.00 fine. Putting feet on chair rounds was punishable by a fine of fifty cents, and spilling ink was an equally heinous breach. Whistling, while less serious, was hardly the sort of thing one could allow on the exchange floor, and so a fine of ten cents penalized it. Absence from morning roll call cost only six and a quarter cents in penalties, an unaccustomed flowering of mercy on the part of possibly late-rising exchange officials.

Of course, some of the rules had a more serious purpose. As exchanges originally operated, a large part of the value to their members was access to secret information. In order to keep it secret, the exchange levied a fine of twenty-five cents on any member going out and returning during a session - fifty cents if he took his sales book with him. Although all partners of a firm were allowed to depart as a body, provided they not return during the session, if only one member left it cost him fifty cents. Passing notes to the outside was also forbidden and punishable.

The coming of the telegraph, and in 1884 the ticker, made many of these rules obsolete. However, as late as the 1900's the exchange coffers waxed rich with the contributions of members who cursed, spat, or refused to address their peers as "Mister."

In 1870, the Philadelphia Stock Exchange established the first clearing house in the United States. The function of the clearing house was to settle purchases and sales and assist delivery of securities. Each night, the closing price for each security was noted, and members' accounts credited or debited depending on the performance of their trades. However, the clearing house only settled "round lots." Shares of "odds lots" were settled directly between buyers and sellers.

The great speculative scandals and panics of the nineteenth century all took their toll on the Philadelphia floor. However, the collapse of Jay Cooke & Company was particularly painful. Jay Cooke had been the key financial figure in the Civil War. He changed the way bonds were distributed, bringing them to investors in small towns across the country. On Wednesday, September 17, 1873, Cooke was in his Chelton Hills mansion, named "Ogontz" after an Indian Chief, entertaining President Grant at dinner. On Thursday he was bankrupt. "No one could have been more surprised if snow had fallen amid the sunshine of a summer noon," wrote The Philadelphia Inquirer. Cooke's Northern Pacific Railroad had been a favorite for speculators on the Philadelphia Stock Exchange, and his failure cost them thousands.

Of course, the market came back. The Philadelphia Exchange weathered this and subsequent crises. In the Panic of 1907, the Knickerbocker Trust Company suspended payments and call money rates hit 125%. In 1914, the exchange closed for nearly four months because of market turmoil in expectation of a war in Europe. It closed again for 10 days in 1933 for the bank holiday declared by President Roosevelt. Aside from these two instances, exchange operations have continued throughout the 20th century without interruption.

The tradition of innovation established by Mayor James Hamilton's first break with precedent has carried on. In 1923, member Herbert T. Greenwood proposed to the board that he become a dealer in the stock of the Pennsylvania Railroad. In return, he agreed to purchase or sell all market order odd-lots of the stock at 1/8th of a point from the next sale on the New York tape, printed within three minutes of the order. He agreed to execute limit order odd-lots under the same rules as prevailed on the New York Stock Exchange. He also agreed to accept round-lot orders in Pennsylvania Railroad stock and make a market based on bid and offer prices on the New York Stock Exchange.

The Exchange tried the program on an experimental basis, and it worked well. Similar odd-lot dealer-specialists were established for other active stocks, and other regional exchanges also adopted the plan.

After World War II, the Philadelphia Stock Exchange began to reach out beyond Philadelphia. Philadelphia merged with the Baltimore Stock Exchange in 1949, and with the Washington Stock Exchange in 1953. Through associate membership agreements, Philadelphia expanded its trading base to Pittsburgh, Boston, and Montreal.

The development of computers during the 1960's and 1970's changed every business, and the securities business was no exception. Philadelphia was among the first exchanges to catch the wave of electronic trading. In 1975, the Philadelphia Stock Exchange introduced a small order routing and execution system for stocks called PACE (Philadelphia Automated Communication and Execution System). It is a computer-to-computer system that provides electronic execution of stock orders instantly. Brokers anywhere in the world can use the system to buy or sell any of the most actively traded stocks in the United States, while receiving the best quoted price on any of the U.S. exchanges. So, like the primitive semaphore system that first brought New York quotes to the floor of the Philadelphia Exchange in the early nineteenth century, electronic trading ensures that customers of the Exchange will be able to execute their trades with confidence that no other exchange could offer better prices.

In the midst of its technological developments for the equity trading floor, the Philadelphia Stock Exchange continued its aggressive program of product innovation by listing stock options in 1975. Thus Philadelphia became the first regional stock exchange to list equity options for trading and hedging purposes.

By April, 1988, the Exchange utilized the electronic trading technology first used on the equity floor to build a new system to accommodate options trading. The Automated Options Market (AUTOM) system allows electronic delivery of options orders from member firms to the Exchange floor, automatic execution of certain orders and electronic confirmation of execution.

However, the most far-reaching innovation of the twentieth century was the Philadelphia Stock Exchange's invention of exchange traded currency options in 1982. By 1988, currency options were trading in volumes as high as $4 billion per day in underlying value. Currency options put the Exchange on international maps, bringing trading interest from Europe, Pacific Rim and the Far East, and leading the Exchange to be the first securities exchange to open international offices in money centers overseas.

Currency options made the Philadelphia Stock Exchange around-the-clock operation. In September, 1987, Philadelphia was the first securities exchange in the United States to introduce an evening trading session, chiefly to accommodate increasing demand for currency options in the Far East. In January, 1989, the exchange responded to growing European demand by adding an early morning session. Finally, in September, 1990, Philadelphia became the first exchange in the world to offer around-the-clock trading by bridging the gap between the night session and the early morning hours. Although the exchange subsequently scaled back its trading hours, its current currency option trading hours from 2:30 a.m. to 2:30 p.m. (Philadelphia time) are longer than any other open outcry auction marketplace.

Perhaps the single most significant currency trading innovation since currency options themselves was the Philadelphia Stock Exchange's creation of the United Currency Options Market (UCOM) in November of 1994. UCOM, the first market in the world to offer customizable currency options in an exchange environment, allows users to customize all aspects of a currency option trade including: choice of exercise price, selection of currency pairs, premium quotation as either units of currency or percent of underlying value, and customized expiration dates of up to two years. While the landscape for trading currency options is ever changing, the PHLX continues to explore opportunities within this critical marketplace and is poised to respond to the needs of its market users.

As the financial community has continued to evolve, the exchange's vision has also broadened to encompass new ideas and new solutions. One outgrowth of this vision was the development of the exchange's Sectors Index Options, one of the most significant options success stories on any U.S. exchange in the 1990's. Comprising industry-specific and broad-based indices, these instruments have made the Philadelphia Stock Exchange an industry leader in sectors index options trading. In fact, several of the Philadelphia Stock Exchange's Sectors have emerged as industry benchmarks and are widely quoted barometers of the activity in key market segments. Similarly, the Gold/Silver Sector (XAU), the KBW Bank Sector (BKX), the Oil Service Sector (OSX), the Semiconductor Sector (SOX) and TheStreet.com Internet Sector (DOT) have established themselves, in a highly competitive environment of other indices, as leading industry indicators.

External link

• PHLX Official Website (http://www.phlx.com)]