TheGrowthandAdvancementsofInvestmentBanking

KellyLux

EnglishIIIStandardPd.2/6
Mr.Piatak
February26,2015


Lux1

KellyLux
Mr.MichaelPiatak
EnglishIIIStandard
26February2015

TheGrowthandAdvancementsofInvestmentBanking
"Don'tsavewhatisleftafterspending,butspendwhatisleftaftersaving(Warren
Buffett).Investmentbanking,aprosperouscareerchoice,helpscompaniesgetintomergersand
helpsraisefinancialcapitalforpeopleandthegovernment.Becausethebusinessprofessionhas
developedthroughthecontinuallychangingstagesoftheeconomy,theeducationalrequirements
toachievesuccess,andtheadditionofnewideas,thefieldofinvestmentbankingprovidesnot
onlyasustainablecareer,butalsoavitalcomponentofthefiscalindustry.
TheAmericaneconomythrivesoffoftheinternationalnetworkingbetweenthe
commercialenterprisesofothercountries.Throughouthistory,wars,recessions,andother
economiccatastrophesaffecttheprogressionoftheglobaleconomy.Yearsago,theeconomies
ofSpain,Italy,andGreececollapsedwhichcreatedadrasticdeclineinthemonetaryvalueofthe
currencyinEuropeancountries.ThischaoticcrisisalmostdirectedAmericatowardsa
doublediprecession.Ontherareoccasionthatadoublediprecessionoccurs,acountries
economyentersintoarecession,experiencesshortperiodsofgrowth,andthenreturnsbackto
theiroriginalstageoftherecession.Duringthistime,Europeancountriesagreedtoaskother
countriesiftheycouldsupplythemwithmoneytorecoverfromthecollapse.Inreality,theydid
notneedhalfasmuchastheyaskedfor.AsaresultoftheliesvariousEuropeancountriestold


Lux2

regardingthetremendouslevelsofdebtacquiredduringthecrash,othercountriesinmorestable
economicconditionsagreedtoassistEuropewithpayingofftheirdebts.ThispromptedWall
StreettraderstoquestiontheEurosvalueandabilitytothriveintheeconomy(Francis).The
effectsofthisincidentledtothecurrentdeflationoftheEurotoday.
Whencountriesplungeintoarecession,thatmeansallstocksoriginatinginthatcountry
decrease.WhenAmericaenteredintoarecession,thestockmarketcrashed.Thiscausedmany
peoplearoundtheworldtolosemoneyinthestockmarket.Whenonenation'seconomy
crashes,ithasaninternationallynegativeeffectonothernationseconomicsystems.Thestock
marketplaysamajorroleinthefunctionandprogressionoftheUnitedStateseconomicindustry
whichinturnprovidestheuniversalfieldofbusinesswiththeresourcesitneedstogeneratea
profit.ThisprinciplecanbetracedbacktobeginningoftheUnitedStatesmarketingfield.
TheNewYorkStockExchangebeganwhentwentyfourNewYorkstockbrokerssigned
aButtonwoodagreementonMay17,1792.Thisestablishedrulesforbuyingandsellingshares
andbondsforcompanies(NewYorkStockExchange).Thetwentyfourmenthatsignedthe
constitutionoftheNewYorkStockExchange:LeonardBleecker,HughSmith,DavidReedy,
PeterAnspach,G.N.Bleecker,GulianMcEvers,EphraimHart,BenjaminWinthrop,JohnA.
Hardenbrook,BenjaminSeixas,AndrewD.Barclay,BernardHart,SamuelMarch,Alexander
Zuntz,JohnHenry,SamuelBeebe,JohnFerrers,IsaacM.Gomez,AugustineH.Lawrence,John
Bush,Armstrong&Barnewall,Sutton&Hardy,Robinson&HartshorneandCharlesMcEvers,
Jr.InAprilof2006,theNewYorkStockExchangewentpublicwhilesimultaneouslyswitching
overelectronically.Previous,potentialmemberswouldhavetopurchaseaseat,andtheyonly
accepted1,366.EightofNewYorksfinestarchitectscompetedforthetitleofdesignerofthe


Lux3

currentstockexchangebuilding.Thebuildingopenedon
April22,1903("NewYorkStock
Exchange").
Inthebeginningthestockexchangestartedoffwithfivetradedsecurities,three
governmentbonds,andtwobankstockswiththeBankofNewYorkbeingthefirst(Terrell).
Yearslaterin1815,thesecuritiesbegantogrow.Governmentbondsandinsurancestockswere
escalatingduetotheaftermathofthewarof1812.
In1817,anewformoftradingwasdiscoveredcalledtheCallMarket,twosessionsof
tradinghappeningdaily.Skippingaheadto1923,thefamousBullMarketemerged,surgingall
stockpricesaheadforsixyears(NewYorkStockExchange).OnSeptember3,theDowJones
Industryreachesitspeakof381.17intheyearof1929.OnOctober29,"BlackTuesday,"prices
fellrapidlycausingthestockmarkettocrash.Thecrashformedrecordbreakingvolumeof
almost16millionshares.TheDowJonesIndustryfallsmoreoverthan11percent.
(NewYork
StockExchange).Duringtheyear1949,pricesroseforeightconsecutiveyears,gettingthetitle
ofthelongestbullrun.Thenin1990,thestockmarketreachedatotaloffiftyonemillion
Americanswhoownedstocks(NewYorkStockExchange).
TheNewYorkStockExchange(NYSE)iscomposedofvariousbranchesanddifferent
tradingfloors.DailyattheNYSEArca,anelectronictradingfloor,traderscanpotentiallytrade
morethaneightthousanddifferentexchangelistedsecurities.BecauseoftheArcasspeedand
functionality,thisexchangehasevolvedintothenumberoneplacefortradingandlisting
exchangetradedfundsandproducts.AnotherbranchoftheNYSE,theAmexhasbecomethe
premiermarketforthetradingandlistingofsmallandmicrocapcompanies.TheAmexhas
verystrictrequirementsforacompanytoacquirelisting.TheArcaEdge,aplacetoquicklyand
efficientlytradeoverthecounterstocks,offersthebeststockprices.(NewYorkStock


Lux4

Exchange).TheNewYorkStockExchangesbell,itsmostrecognizablefeature,signifiesthe
startandclosingofthetradingday.Thebell,implementedinthe1870s,originallystartedout
asaChinesegong,buttransitionedintoanallbrassbellin1903.Eachofthefourdifferent
tradingfloorscurrentlyhouseabellwhichalloperatesynchronously.
AlongwiththeNewYorkStockExchange,manyotherstockexchangesaroundthe
worldassistinopeningdoorstotradingopportunities,includingthoselocatedinAmsterdam,
London,and.OneofthefirststockexchangesintheworlddevelopedintotheAmsterdamStock
Exchange.Createdfourcenturiesago,theAmsterdamStockExchangeestablishedthepractice
ofsharetradingwhichtodayinvolvesprospectivestockownerscontactingstockbrokersinorder
toobtaintheinformationrequiredforplacingknowledgeableinvestmentsintoavailable
companies.Thismethodunderwentvariousdevelopmentsandadaptationssothatitcould
transformintothestocktradingpracticespresentinmoderndayinvesting.Anothersignificantly
productiveexchange,theLondonStockExchange,beganintheearlyseventeenthcentury.They
originallystartedoutasapartoftheRoyalExchange,butforareasonssuchasrambunctious
behavior,theywereofficiallydismissed.NowseparatefromtheRoyalExchange,theykicked
offtheirbusinessbycarryingouttheirdailytasksinsideoflocalcoffeeshops.Theyrapidly
developedintoanessentialpartofthefinancialcommunity(LondonStockExchange).
Despitemanychallengingtimes,theLondonStockExchangemanagedtoovercomeasudden
shutdownwhentheGreatWarbrokeoutinmanyEuropeancountries.Occurringin1914,the
waropenedmoreopportunitiesforjobsinthestockmarketwhichboostedthemarkets
popularityinEurope.Skippingaheadto2007,theLondonStockExchangemergedwithBorsa
Italy,creatingtheLondonStockExchangeGroup(LondonStockExchange).Paris,an


Lux5

extremelypopulouscity,holdsthestockexchangebuildingcalledtheLyonsBoursewhich
wasbuiltaround1540.During1639,aroyalorderwasinstalledwhichacquiredthename
courratierstoagentdechangeforpeopletradingwithcommercialbillsandsecurities.Paris
hadyettoformanorganizedstockexchange,despitethefactthatalistofagentswaspublished
in1684(Paris:ItstartedwiththeLyonsBourse).Withoutthehelpofafewindividuals,the
stockmarketwouldnothavedevelopedintothesuccessfulmarketmanyexperiencetoday.
Onesignificantindividual,JohnLaw,contributedbyinfluencingthemonetarysystemin
France.Law,borninScotlandin1671,wasthesonofaScottishbanker.Hereceivedan
educationinpoliticaleconomy,commerce,andeconomicsinLondon.Hewasbanishedfrom
Amsterdamfromkillinganopponentinaduel.Therehecontinuedhiseducationandstartedto
practicebanking(JohnLawandtheMississippiScheme).Duringtheearly1700s,JohnLaw
triedtoconverttheFrenchtopapermoneybyputtingBanqueRoyalebanknotesintocirculation.
TheRoyalCouncilofStateauthorizedthecreationofastockexchangein1724forParis.In
1791,theagentsdechangecorporationdisbanded.Becauseoftheturmoilin1793,theLyons
Bourseclosedandjointstockcompaniessplit(Paris:ItStartedWiththeLyonsBourse).The
LyonsBourseclosedonSeptember9th,1795,onlytoreopenonOctober20th,1795.
ThroughoutthehistoryoftheLyonsBourse,thenumberofagentsdechangecontinually
increased.ThestocksquotedontheParisBourseincreasedexponentiallywhileFrance
expandeditsindustryandtrade,builtcanalsandrailways,andestablishedfinancialinstitutions.
In1900,onaveragethreehundredforeignandmorethaneighthundredFrenchsharesandbonds
weretradeddailyattheFrenchStockExchange.In1967,apieceoflegislationpassed,
permittingthemultipleagentdechangeofficestomergeforsecurityreasons,whichledtothe


Lux6

singleexchangebuildingtheyhavetoday.Almosteverynationexperiencedatimeof
consolidationduringthe1980swhichgreatlyaffectedtheirstockmarketsandeconomies.In
France,theysawradicalchangesintradingtechniques.Duringthistime,theytransitionedto
electronictrading.TheStockMarketReformActofJanuary1988replacedtheCompagniedes
AgentsdeChangewiththeSocitdesBoursesFranaises.TheFrenchmarketbecamefully
integratedwithEuropebyJuly2nd1996becauseoftheFinancialActivityModernizationAct
(Paris:ItStartedWiththeLyonsBurse).FollowingshortlyaftertheFrenchStockExchange,
theFrenchGovernmentestablishedtheLondonInternationalFinancialFuturesandOptions
ExchangeorLIFFEwhichoccurredin1982.Overtheyears,LIFFEhasacquiredmanynew
financialinstrumentsshortterminvestmentrates,bonds,swaps,equities,andcommodities.
Withintheirfirsttenyearsofexistence,theyofferedinterestratesfortheworld'smajor
currencies.LIFFEmergedwiththeLondonTradedOptionsMarketin1992,givingthemthe
abilitytoofferequityoptions.In1996,LIFFEmergedagainwiththeLondonCommodity
Exchangewhichallowedthemtoofferarangeofsoftandagriculturalcommoditycontracts.
Overtheyears,tradingattheLIFFEhaschangeddramatically.TheLIFFE,nowthemost
sophisticatedtradingplatformintheworld,wasutilizedtotradebyopenoutcry(London:The
LIFFE).
Investmentbankinghelpsraisecapital,andsecurityunderwriting,mergersand
acquisitions,retailandcommercialbanking,salesandtradingandequityresearch.Investment
banksarespecialtypesofbanksdesignedtodealwithalargevarietyoffinancialservices.
Investmentbankingisdividedintotwopartsthebuysideandasellside.Thesellsidedealswith
salesofsecuritiestothebuyside,creation,promotion,andanalysis.Ithelpsbringfundingand


Lux7

securitiesintothemarkets(Investopedia).Thebuysidedealswithpensionfunds,privateequity
funds,mutualfunds,andhedgefunds,alsohelpsfirmswithmanagingtheirmoney
(investopedia).Thegoalofinvestmentbankingistoraisecapitalforcompanies,andhelpguide
themwithequity,debt,andnewofferingsofsecurity.Theyserveasguidesintomergersand
acquisitions,andhelpadvisecompaniesfinancially(investopedia).Someexamplesofmajor
investmentbanksareMerrillLynch,JPMorgan,Citibank,andBarclays.Investmentbanksare
differenttheydonottakedeposits.Around1933through1999theGlassSteagallActforced
commercialandinvestmentbankstobeseparate(investopedia).
TheGlassSteagallActortheBankingActof1933wasorganizedwhenalmost5,000
banksclosedduringthegreatdepression.FranklinT.Rooseveltintendedthistobeapartofhis
newdealprogramwhichadditionallycreatedmanystrictrulesfortheFederalreserve,and
prohibitedbankstosellsecurities,whichcreatedtheFDICFederalDepositInsurance
Corporation(TheNewYorkTimes).Thisactforcedcommercialandinvestmentbanksto
separatebecausetheeconomyhadreachedanalltimelow,soinordertorestoreconfidencein
theeconomytheymadeitsoinvestmentbankscouldnotreceivedeposit(TheNewYorkTimes).
Theresultofthisacthelpedstimulatetheeconomy,andinfluencedtheformationofthe
GrammLeachBilelyActof1999whichmademajorchangestotheGlassSteagallAct.In
early2000stheVolckerRulegenerallyprohibitsinsureddepositoryinstitutionsandany
companyaffiliatedwithaninsureddepositoryinstitutionfromengaginginproprietarytrading
andfromacquiringorretainingownershipinterestsin,sponsoring,orhavingcertain
relationshipswithahedgefundorprivateequityfund(TheBoardofGovernorsandFederal
Reserve).


Lux8

Thefieldofbusinessoffersmanypossibleprofessionsalongwithbecomingan
investmentbankeranotheroptionincludesstockbrokers.Thejobofaninvestmentbanker
entailstheacquiringofextensiveknowledgeofdifferentstocks,thoroughlyunderstandingthe
rulesandregulationsforgivingoutandsellingloans,andobtainingafullawarenessofthe
worldsmajorcompaniesandtheirneedsforinvestingtheirmoney.Theinvestmentbanker
shouldactasanimpartialadvisortoclientswhoonlyofferfactsbasedontheirknowledgeofthe
situation.Forexample,amajorcorporationmightaskforhelpiftheywanttoborrowmoneyin
thebondmarkets,orbuyupanothercompany,orputmoneyintothestockmarket(Knight).In
ordertobecomeaninvestmentbanker,thejobrequiresworkinginamajorbank.Thehours
workedaweekrangeforfiftytosixtyhours,withanaverageoftwentysevenpaidtimeoff
(PTO)dayseveryyear(Montambo).
Thejobofinvestmentbankingrequiresmanyyearsofschooling,andpreviousjobexpire
niceandmanydifferentskillsets.AstheVicePresidentofFirstCitizensBankandMarket
ExecutiveRyanMontambofinishedwithaBSBAwithconcentrationinfinanceandminorin
economics(Montambo).Agoodfocuswouldbeonbankingandsales,orfinancesand
communications.Salesisacriticalcomponentinbankingbecausethecycleofbuyingand
sellingstocksfailstooperatewithouttheconstantinteractionofbrokerandclient.Withthe
adequateyearsofschoolingcompletedandanattitudedrivenforsuccess,potentialstudentsof
businesscanaccomplishthedemandingtasksofthefield.
Throughyearsofprogressionalongwithavarietyofadvancements,thefieldof
investmentbankingnowholdsthepotentialtostimulatethestockmarket.Expertsofthis
professionexperienceyearsofschoolingwiththeadditionofnewconcepts.Withtheproper


Lux9

knowledgeofthestockmarketandahardworkingattitude,investmentbankingprovidesa
prosperouscareerchoice.


Lux10

WorksCited
"AmsterdamStockExchange."
NYSEEuronext
.NYSE,n.d.Web.22Feb.2015.
<http://www.nyx.com/en/whoweare/history/amsterdam>.
Francis,David."IstheU.S.EconomyProtectedFromtheEuroCrisis?"
USNewsRSS
.U.S.
News,17Aug.2012.Web.22Feb.2015.
<
http://money.usnews.com/money/businesseconomy/articles/2012/08/17/istheusecono
myprotectedfromtheeurocrisis
>.
"HomeLondonStockExchange."
HomeLondonStockExchange
.N.p.,n.d.Web.26Feb.
2015.<
http://www.londonstockexchange.com/home/homepage.htm
>.
"InvestmentBankerDefinition|Investopedia."
Investopedia
.N.p.,23Nov.2003.Web.26Feb.
2015.<
http://www.investopedia.com/terms/i/investmentbanker.asp
>.
"InvestmentBanking."
News
.TheNewYorkTimes,n.d.Web.26Feb.2015.
<
http://topics.nytimes.com/top/reference/timestopics/subjects/i/investment_banking/inde
x.html>.
Knight,Laurence."WhatDoInvestmentBanksDo?"
BBCNews
.BBC,09July2010.Web.24
Feb.2015.<
http://www.bbc.co.uk/news/business11211776
>.
"London:TheLIFFE."
NYSEEuronext
.NYSE,n.d.Web.23Feb.2015.
<
http://www.nyx.com/en/whoweare/history/london
>.
Montambo,Ryan.PersonalInterview.23February2015.
"NewYorkStockExchange."
NYSEEuronext
.NYSE,n.d.Web.23Feb.2015.
<
http://www.nyx.com/en/whoweare/history/newyork
>.
"Paris:ItStartedWiththeLyonsBourse."
NYSEEuronext
.NYSE,n.d.Web.23Feb.2015.


Lux11

<
http://www.nyx.com/en/whoweare/history/paris
>.