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The Highest Price Ever: The Great NYSE Seat Sale of 1928–1929 and Capacity Constraints

Author

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  • Davis, Lance E.
  • Neal, Larry
  • White, Eugene

Abstract

During the 1920s the New York Stock Exchange's position as the dominant American exchange was eroding. Costs to customers, measured as bid-ask spreads, spiked when surging inflows of orders collided with the constraint created by a fixed number of brokers. The NYSE's management proposed and the membership approved a 25 percent increase in the number of seats by issuing a quarter-seat dividend to all members. An event study reveals that the aggregate value of the NYSE rose in anticipation of improved competitiveness. These expectations were justified as bid-ask spreads became less sensitive to peak volume days.

Suggested Citation

  • Davis, Lance E. & Neal, Larry & White, Eugene, 2007. "The Highest Price Ever: The Great NYSE Seat Sale of 1928–1929 and Capacity Constraints," The Journal of Economic History, Cambridge University Press, vol. 67(3), pages 705-739, September.
    • Handle: RePEc:cup:jechis:v:67:y:2007:i:03:p:705-739_00
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    Citations

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    Cited by:

    1. Neal, Larry & White, Eugene N., 2012. "The Glass–Steagall Act in historical perspective," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 104-113.
    2. White, Eugene N., 2013. "Competition among the exchanges before the SEC: was the NYSE a natural hegemon?," Financial History Review, Cambridge University Press, vol. 20(1), pages 29-48, April.
    3. Pierre-Cyrille Hautcoeur & Amir Rezaee & Angelo Riva, 2018. "Competition among Securities Markets," Working Papers halshs-01863942, HAL.
    4. Moser, Petra, 2012. "Taste-based discrimination evidence from a shift in ethnic preferences after WWI," Explorations in Economic History, Elsevier, vol. 49(2), pages 167-188.
    5. Pierre-Cyrille Hautcoeur & Amir Rezaee & Angelo Riva, 2023. "Competition between securities markets: stock exchange industry regulation in the Paris financial center at the turn of the twentieth century," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 17(2), pages 261-299, May.
    6. Bernard Mcsherry & Berry K. Wilson & James J. Mcandrews, 2017. "Net Settlement and Counterparty Risk: Evidence from the Formation of the New York Stock Exchange Clearing House in 1892," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(6), pages 1273-1298, September.

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