Friday, May 17, 2013
May 17 (1792) the New York Stock Exchange is formed; Tontine Coffee House forms Tontine
On this day May 17, 1792, the Buttonwood Agreement was signed by twenty-four stock brokers outside of 68 Wall Street New York under a buttonwood tree, forming what would eventually be called The New York Stock Exchange.
Starting in 1793, these brokers would conduct their business in the Tontine Coffee House.
At its extreme, a "tontine" is an investment plan that increases proceeds to survivors as the pool of investors die. This financial innovation was developed by Neapolitan banker Lorenzo de Tonti in the 17th century.
Writing in the Fordham Journal of Corporate & Financial Law, Kent McKeever notes that the Tontine Coffee House itself was financed through a tontine. Mr. McKeever also notes that many dramatic renderings have been inspired by tontines, including a 1996 episode of "The Simpsons" entitled "Raging Abe Simpson And His Grumbling Grandson in 'The Curse of the Flying Hellfish'."
Burns: Then it's agreed. Of course, we can't sell the paintings now, we'd be caught. How many of you are familiar with the concept of a "tontine"?
[all stare at him, until Ox raises his hand]
Burns: All right, Ox. Why don't you take us through it?
Ox: Duh, essentially, we all enter into a contract whereby the last surviving participant becomes the sole possessor of all them purty pictures.
Burns: Well put, Oxford.
Image taken from the Library of Congress - The Tontine Coffee House, Wall & Water Streets, about 1797