Why Is New York a Financial and Economic Hub?

A famous buttonwood tree stands outside the New York Stock Exchange on Wall Street. This seemingly insignificant spot is where 24 stockbrokers created the Buttonwood Agreement in 1792, setting the wheels in motion for the modern financial trading system. 231 years later, New York remains the financial and economic hub of the world. Have you ever wondered why this city with nearly 20 million people is this revered? Let's learn more about this topic here.

How New York Became So Powerful

The history of New York starts about 10,000 BC, long before it was a forex trading center and dominated the economic world. Yet, it was only in 1776 that the state was officially founded. Geography has always favored New York, making the state the go-to place for adventurous immigrants and merchants.

The New York Harbor has been the standout trading hub since the 18th century. It remains one of the largest and longest-standing natural harbors. A combination of the surrounding land and great depth make it a perfectly integrated body of water between Europe and North America's east coast.

A trip from the United Kingdom to New York Harbour is under 3,000 nautical miles (much shorter than other major financial hubs around the world), resulting in a favorable connecting point for the two continents. The harbors are also well-positioned between areas around the Gulf of Mexico where immense production happens and goods benefit from cheap transportation.

Of course, it's not just the waters. The foundation of New York's buildings is unique. Due to distinct rock formations and a metamorphic process that happened centuries ago, New York has a strong bedrock. This made New York coveted land since it formed, with businesses flocking in daily to be part of the action.

This foundation holds all the massive skyscrapers in the state, with New York City boasting the third-most in the world. The same tall buildings are where the most valuable companies globally have offices.

New York (and really the whole United States) became influential due to a combination of factors like geography, topography, and immigration, among others.

Why Is New York The World's Financial Capital?

A financial hub or center is any city or state with a strategic location, many large financial institutions for forex trading, massive stock exchanges, and first-class infrastructure and communications. New York ticks all these boxes. Here are the reasons it's the world's financial capital.

Stock Exchanges

The first apparent reason is that New York is home to the two largest stock exchanges globally: the New York Stock Exchange (NYSE) and NASDAQ. The NYSE is among the oldest stock exchanges in the world.

Stocks have always been paramount to any country's economy. Given the longevity of the NYSE, New York's first-mover advantage makes the city so influential. The market cap valuations of the NYSE and NASDAQ are about $22.64 trillion and $20.13 trillion, respectively.

Presence of Financial Institutions

Stock exchanges are examples of large financial companies, but this only scratches the surface. The world's largest bank (according to Forbes) globally in market cap is JPMorgan Chase, which has headquarters in New York. 

Two other banks (Wells Fargo and Morgan Stanley), in the top 10 of the largest banks in market cap worldwide, have their head offices in NY. The same companies fuel the globe's forex trading network with the US dollar at the forefront.

Cultural and Media Diversity

New York is culturally diverse due to its immigration history, with large Italian, English, Asian, African, and Hispanic migrations over time. Around 800 languages are spoken in the state alone, making it the most linguistically versatile city globally. 

This much cultural variance brings about countless entertainment avenues that result in wealthy talents and a financially prosperous city. New York is home to some of the world's best visual art, music, filmmaking, stage performance, literature, and museums.

Can Another City Overtake New York In Financial Dominance?

There has been much conversation about the subsequent global financial or economic hub. Rankings from the Global Financial Centres Index are the most objective assessment method. The 2023 standings show New York in first place, followed by London, Singapore, and Hong Kong.

London's influence is also unshakeable, presenting many ingredients necessary for a financial center. London and New York have swapped the top spots for global financial hubs in the last few decades.

The main challenge and why New York will remain dominant is that London is the only major city in the United Kingdom. Meanwhile, New York has other US powerhouses to rely on, like San Francisco, Washington D.C., Chicago, and Los Angeles, which feature in the top 10 of the rankings.

Final thoughts: New York’s Dominance Will Likely Continue

It's not only a general opinion that New York is the world's financial capital. Index rankings from Global Financial Centers have named it so for the sixth year running since 2018. The state of New York is fortunate that its dominance generally reflects America's power. Yet, while the country has 50 states, the world cannot get enough of New York. In the words of Mark Twain, "Make your mark in New York, and you are a made man.”

Andres Abadia