Which of the following is a reason why the New York Stock Exchange (NYSE) began to trade mostly stocks?

• A. The NYSE was originally founded to trade only government securities.
• B. Government regulations prohibited the trading of bonds and commodities on the NYSE.
• C. Stocks were less risky than other financial instruments available at the time.
• D. Stocks represent ownership in companies, which attracted more investors seeking equity participation.

Answer: (D)

Verified step by step guidance

1. Understand the historical context of the New York Stock Exchange (NYSE) and its original purpose, which was primarily to facilitate trading of government securities.
2. Recognize that government regulations did not prohibit the trading of bonds and commodities on the NYSE, so regulatory restrictions are not the main reason for the shift to stocks.
3. Consider the risk profiles of different financial instruments at the time; stocks were not necessarily less risky than bonds or commodities, so risk alone does not explain the shift.
4. Focus on the nature of stocks as financial instruments: stocks represent ownership in companies, giving investors equity participation and potential for dividends and capital gains.
5. Conclude that the primary reason the NYSE began to trade mostly stocks is because stocks attracted more investors seeking ownership and equity participation, which increased demand and trading volume on the exchange.