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Philadelphia Merchants Exchange Building

America’s First Stock Exchange: The Philadelphia Stock Exchange

By Michael J Defosse - November 27, 2019


The Board of Brokers


The Philadelphia Stock Exchange (PHLX), founded in 1790, was the first stock exchange established in the United States. Originally named the Board of Brokers of Philadelphia, it was also known as the Philadelphia Board of Brokers. The first meeting place was the Merchant Coffee House, now known as City Tavern, which is at the corner of 2nd and Walnut Streets.



History of the Philadelphia Stock Exchange


In 1831, Girard Bank formed the Philadelphia Merchants Exchange Company, which was established to build a location to house the Board of Brokers as well as other groups. A few years later, in 1834, the Board of Brokers moved into the Merchants Exchange Building, which was located at 3rd and Dock Streets.

By 1874, the Board of Brokers membership consisted of 198 seats with a market capitalization of $350,000. One year later, the Board of Brokers changed its name to the Philadelphia Stock Exchange, which it kept until it became part of NASDAQ.

The exchange grew organically as well as through a series of mergers. In 1949, the Baltimore Stock Exchange merged with the Philadelphia Stock Exchange, forming the Philadelphia-Baltimore Stock Exchange. A few years later, in 1954, the exchange merged with the Washington Stock Exchange, which became the Philadelphia-Baltimore-Washington Stock Exchange (PBW). The last merger occurred in 1969 when the PBW Stock Exchange acquired the Pittsburgh Stock Exchange.


The Philadelphia Stock Exchange had some industry leading events. It was one of the first exchange to embrace electronic trading. In 1975, it introduced a stock order routing and execution system called Philadelphia Automated Communication and Execution System (PACE). The system linked computers and allowed for instant electronic order execution. Additionally, in 2004, the exchange became the first floor-based stock exchange to transform from a seat-based cooperative to a share-based for-profit company.

By 2005, a several major financial firms purchased stakes in the Philadelphia Stock Exchange to hedge against the growing consolidation of stock trading on the New York Stock Exchange (NYSE) and the NASDAQ. The firms included Morgan Stanley, Citigroup, Credit Suisse First Boston, UBS, Merrill Lynch and Citadel, which collectively owned about 89% of the exchange. A few years later, in 2008, NASDAQ OMX Group acquired the Philadelphia Stock Exchange and changed the name to the NASDAQ OMX PHLX.


The Rise of NASDAQ PHLX


Following the acquisition, the NASDAQ OMX PHLX focused upon options trading. In addition to equity, index and ETF option series, it traded sector index options, such as NASDAQ OMX Alpha Options and PHLX World Currency Options on 11 currencies.

Currently, the NASDAQ PHLX focuses on equity, currency and index options. It has an extensive library of sector indexes, including PHLX KBW Bank Index (BKX), PHLX Gold/Silver Index (XAU) and the Philadelphia Semiconductor Index (SOX).


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