BAJAJ BROKING
November 18, 2024
4 mins read
Did you think Wall Street was just a street name? If so, you are right. Wall Street is actually the name of the popular area in lower Manhattan, New York City. Historically, this iconic area became the epicentre for investment banks and brokerages, when they established their headquarters in Wall Street and its surrounding area. Gradually the place became popular and the term Wall Street started symbolising the investment market of the USA. So, Wall Street is the umbrella term for the financial market operating for public trade in the USA.
Anyone entering the market of trade must be curious to learn about the famous Wall Street. So, let's discuss the importance of Wall Street and the role it plays in the investment market.
The Financial District in Manhattan, as the locals call it, is the area in and around Wall Street and southern Manhattan. Historically, various investment firms and banks were established in this area which gradually led to its popularity. The Arturo Di Modica statue of the Charging Bull is also situated around Wall Street. The investment community in the USA, the investment banks, and firms that exercise public trade collectively call themselves Wall Street. Not just this but brokers, brokerages, underwriting firms, and stock exchanges also make a part of Wall Street.
The history of Wall Street symbolises the investment and trade market in New York City. However, today it is no longer essential for a firm or an investment bank to be situated in or around Wall Street to be a part of it. Companies located elsewhere also indicate Wall Street. This is majorly because in today's time, trading and investment have escalated to a global level and digitization has also led to online trading. So, irrespective of the firm's location in the USA, they relate to Wall Street altogether.
Wall Street holds its significance not just in the American trade market but globally as well. It plays a crucial role in global trade, and Wall Street also holds significance.
Wall Street rose to significance after multiple financial firms and companies were established in and around the lower Manhattan area, the Wall Street.
The significance of Wall Street is also high because the NYSE, the New York Stock Exchange, is also located on Wall Street.
History has witnessed various events in the Wall Street area that have not just affected the markets of the USA but global trade markets as well.
Wall Street is also often linked with Main Street, a term used for individual investors and small businesses.
The success of Wall Street since 1934 has a major role to play in shaping American prosperity.
The USA is also a leading global trader which eventually makes Wall Street a crucial player in the trade market.
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Economically and culturally, Wall Street has a huge impact on the USA and also the entire world. Now that you know what is wall street, let's understand why it is so important.
Economic Importance
Talking of the economic importance of Wall Street, it is the home of the world's largest stock exchanges; the Nasdaq Stock Exchange and NYSE (New York Stock Exchange)
These stock exchanges employ thousands of people who impact not just the American economy but the world economy as well.
Stock exchanges at the Wall Street list major players in the world like Amazon, Google, Apple, Exxon, etc.
Firms in Wall Street are also involved in lending loans across the globe to various businesses, thus, impacting the world economy.
Last but not least, America dominates the world economy and Wall Street and New York City are the financial hubs of the USA.
Cultural Importance
Popularity like that gained by Wall Street is unparalleled and not common to any other financial term.
From movies to web series and novels to celebrities, Wall Street has made its way through all these. Some of the popular movies like Wolf of the Wall Street, Margin Call, Barbarians at the Gate, and more have made it all the more popular.
These movies have banged a hit across the globe, emphasising the popularity of Wall Street among people from all corners of the world.
Various popular names have emerged from Wall Street who are now known to many people and have become celebrities as well. These include Warren Buffet, Carl Icahn, Jamie Dimon, and more.
When speaking of Wall Street, the term brings with it a sense of power and elite and may also bring greed to some.
The history of Wall Street is one of the most interesting stories of financial success in the history of America and the world. Back in 1972, the story of Wall Street began. Let's dive into more details:
The Name
In 1653, Dutch colonists built a wooden wall in the lower Manhattan area of New York City. They built the wall to protect themselves from native Americans and the British colonists. The wall was eventually broken down in 1699. However, the name Wall Street remained there
Beginning of trade: Why Wall Street?
Around the 1700s, trading bustled in New York City. Since the Wall Street area was close to New York City port, it became the center of trade attractions for traders.
Buttonwood Agreement
Back in 1792, the 24 most popular and prominent traders in the USA gathered to start their business and establish a members-only stock exchange. They signed an agreement under the Buttonwood tree that came to be known as the Buttonwood Agreement. They began with trading securities of war bonds.
New York Stock and Exchange Board
It was in 1817 when the team of Buttonwood Agreement brokers renamed themselves. The new name was the New York Stock and Exchange Board.
Wall and Broad Streets
The New York Stock and Exchange Board grew with time and the members rented various locations for their office. Finally, in 1865 they finalised a place for their permanent location. It was the corner of Wall and Broad Streets.
Major Financial Players
Gradually, various other financial players settled in and around the Wall Street area, adding to its importance and popularity. Some of these names include the New York Mercantile Exchange, the New York Futures Exchange (NYFE), the New York Board of Trade, and the American Stock Exchange (NYSE American Options)
19-20th Century and the WW-l
During the 19th and 20th centuries, many banks, brokerage firms, and financial institutions settled around the Wall Street area. The popular J.P. Morgan also established itself opposite the NYSE (23 Wall Street). It was after World War 1 when America rose to prominence with New York City surpassing London as the world's largest financial city.
Additional Read: Understanding the U.S. Stock Market
So far, you have understood what Wall Street is. Now, let's understand how Wall Street works and what happens there:
Trading and Financial Markets
Wall Street consists of the largest financial firms and companies in the world. These companies including brokers and brokerage firms perform trading on a regular basis. Through the stock market, trading across the globe is conducted daily. The firms and brokerages in Wall Street are some of the popular players in the stock exchange markets.
The Role of Investment Banks and Brokers
Wall Street also has leading investment banks (like JP Morgan Chase, and Citibank) and brokers (like JP Morgan). These brokers and investment banks play a crucial role in stock markets.
Investment banks focus on simplifying complex financial tasks like IPOs. They help investors get the most profitable deals and may also provide funds for investment. These banks also ensure that trading and investments run smoothly.
On the other hand, brokers facilitate trading. Brokerage firms are the platforms where traders can execute their trading. It is an intermediate between the companies and the traders.
Importance of Stock Exchanges (NYSE and NASDAQ)
Stock exchanges like NYSE and NASDAQ list leading companies in the world. Stock exchanges charge revenues on brokerages that conduct trade on the listed stocks. Since these are the largest stock exchanges in the world, they are obvious to impact the world trade economy.
You may have come across the term main street. It is often used in comparison to Wall Street. So, what exactly does Main Street mean, and its similarity to Wall Street? Let's discuss Wall Street Vs. the main street in detail. Check out the table below for more details:
Wall Street | Main Street |
Wall Street refers to the big companies and investment firms | Main Street usually refers to the mom-and-pop businesses that are smaller in size |
Wall Street is the home to the world's largest stock exchanges | Main Street is not a reference for large stock exchanges but for small businesses and firms |
Wall Street is actually a street in New York City that rose to prominence with the gradual establishment of large companies and firms | Main Street is not an actual street but a term used in contrast to Wall Street |
It is believed by some that Wall Street does not contribute to the real economy even though with highly paid middlemen and large companies | Main Street is believed to be the actual contributor to the real economy |
Wall Street has a crucial role to play in the global economic market and not just the USA. There are various credits in the pockets of Wall Street for the role it plays. Some of these are:
Employment Generation
Wall Street effects are linked with employment generation. When the market is bullish, many companies sell their stocks to acquire wealth. This in turn could be used to acquire more assets. Eventually, business expansion means employment generation.
Crash Predictions
Paul Samuelson, a Nobel laureate once remarked that Wall Street can predict stock market crashes and even depressions. Wall Street has indicated various recessions in the past. Although it can be tough to predict a crash through Wall Street, sometimes it can be an indicator.
Catalyst for Global Expansion
Global recessions of 2002, and 2008, the stock market crash of 1929, and the Great Depression of 1930 can all have their genesis in Wall Street. But it is equally true that Wall Street has also acted as the catalyst to crashes and recessions.
It was the huge rally of 2003 on Wall Street after which, the economic expansion of 2003-07 began post-2002 recession. The Wall Street Rally of 2009 also played a crucial role in further global expansion, the largest ever since the Great Depression of the 1930s.
Wall Street has its share of criticisms and limitations. Along with several advantages, Wall Street has bagged criticisms as well. Some of the notable limitations include:
Rigged Market
Some big names in the investment market have called Wall Street a rigged market. Although the companies and firms on Wall Street claim fair operations, some call the perception rigged.
One of the largest limitations of Wall Street can be referred to as the melting down of mortgage-backed securities back in 2008. This is because some believe that Wall Street offers windfall profits. It happens when the market predictions go right for a trader and they make huge profits. But if the predictions go wrong, the losses are not that high.
U.S Housing Collapse
The USA witnessed a free fall of mortgage-backed securities and huge losses. Back in 2002, Warren Buffet already warned people that the derivatives that are developed by Wall Street can be destructive. These financial weapons can wipe off the financial stability and thus, it happens during the U.S housing collapse.
Comparison to Main Street
Some players believe that the middlemen in Wall Street do not contribute to the real economy even though they are highly paid. This is not the case with Main Street which contributes to the real economy even though small businesses participate in it.
Wall Street Encourages Greed
Wall Street can be lucky for many and million-dollar payouts are also common here. However, many people believe that Wall Street can fuel greediness in many. This is the reason why Wall Street is often seen as a contributor to the greatest recession of all time, the 2008 economic recession.
Additional Read: Call and Put Options: Meaning, Types & Examples
Wall Street has unparalleled popularity among brokers, traders, investors, and commoners across the world. History has not witnessed such popularity in any other financial term. Wall Street, an actual existing street in New York City is the hub of financial giants. Companies like J.P. Morgan, and stock exchanges like the New York City Stock Exchange and NASDAQ are all situated on the popular Wall Street. All these speak to the importance of Wall Street.
Since these players and brokers in the Wall Street affect the trade market and economy across the globe, the prominence of the area is obvious. New York City is currently the leading financial city in the world. If you are planning to enter the trade and investment market, understanding Wall Street and its importance is a must!
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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Wall Street is the name of an actual street in New York City, USA. The term is also a financial symbol for traders, brokers, and financial institutions established in and around Wall Street.
Wall Street is the home to the world's most famous brokerage firms, companies, and financial institutions. These include NYSE, NASDAQ, J.P. Morgan, and more. Since these players have an impactful role in the world's economy, Wall Street has also become a popular term for financial institutions in the USA.
Yes, it could be said that. That's because Wall Street has the world's largest stock exchanges, the New York Stock Exchange and NASDAQ. To these players, the world's largest companies are listed like Google, Amazon, Exxon, etc.
Dalal Street is the Indian equivalent metonym for Wall Street. Located in Downtown Mumbai, India, Dalal Street is the home to India's largest stock exchange, the Bombay Stock Exchange. BSE was the first government-recognised stock exchange in India.
Jobs on Wall Street usually begin during the college days of students. Having a major in subjects like finance, mathematics, economics, and accounting are suitable candidates. One summer internship in Wall Street can be quite beneficial. Investment, operations, and sales are popular job types on Wall Street.
Wall Street operates from Monday to Friday. The time is usually 9:30 AM to 4:00 PM. Before and aftermarket time, there are extended hours as well.
Pre-market sessions begin at around 8:00 AM and continue till market opening time or 9:00 AM. After the market closes at 4:00 PM, the after-market hours can go until 8:00 PM.
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