150 years of the Prague Stock Exchange: Enthusiasm against adversity
Let it serve after the ages of economic prosperity of the Czechoslovak Republic, it stood on a memorial plaque next to the impressive entrance to the new building of the Prague Stock Exchange. The grand opening of its own headquarters took place in April 1938, almost seventy years since its inception. Unfortunately, those “ages” lasted only until March 1939, when Czechoslovakia was occupied by Nazi Germany and stock exchange trades gradually faded, until the activities of the stock exchange ceased completely in 1943. She has been waiting for her renewal for 50 long years. It characterizes the complex, now 150-year-old history that stock exchange trading in the Czech capital has gone through.
The development of the stock exchange in today’s Czech Republic was marked by the domination of bureaucratic lords during the Habsburg monarchy, low state support for a long time, economic ups and downs, but also valuable enthusiasm and desire of Czech business circles for their own paper and commodity markets. The stock exchange experienced probably the best times after the establishment of an independent Czechoslovak state in 1918. That is, just after the fall of the Austro-Hungarian monarchy, in which it was founded.
The birth of the stock exchange in the Czech Republic
According to surviving reports, stock exchanges in today’s sense were established in Europe as early as the 12th century. In the Czech lands, the efforts to create one’s own stock market date back to the reign of Maria Theresa, for whom the Vienna Stock Exchange was established in 1771. In the end, Prague had to wait another hundred. However, the creation of a major economic institution, which was subject to state supervision, required the permission of the authorities. Thus, it was not until 1871 that the necessary funds for the establishment and maintenance of the stock exchange, which was inaugurated, were secured by subscribing 29,870 gold coins from 389 founders. The first stock exchange meeting and, in fact, the first stock exchange trades took place on April 17, 1871, between 11:30 and 13:00 in Na Příkopě Street in areas more reminiscent of a goods store.
Until the establishment of the members of the republic, the stock exchange also included long-term visitors who had the right to participate in trades. The law only defined who did not have access. These were, for example, women, as well as persons who could not be elected to the municipal council due to a criminal verdict, or debtors, bankruptcy persisted or were punished for bankruptcy. They were not allowed on the stock exchange for another three years after the sentence was completed.
The securities business was mostly small, as “a wider audience, unfamiliar with the nature of the stock exchange, used it only sparingly.” However, interest gradually increased and culminated in the spring of 1872. However, the market overheated and exchange rates followed. After some recovery, another blow came in the form of a bankruptcy on the Vienna Stock Exchange, which reached as far as Prague. Exchange rates have fallen again, a number of securities have disappeared from the price list, and the stock exchange has been living for decades since the establishment of the republic. And although it had a commodity trade in its name, it had never been more important in its history.
Better times with Rašín’s support
In an independent Czechoslovakia, there were times of strong stock market prosperity, which finally could not complain about the small support of the state and the ruling party. The first Czechoslovak Minister of Finance, Alois Rašín, was an important figure in this regard. Not only did he show interest in and support the stock market, but he also contributed to the new national currency, which became a solid island in the midst of the surrounding post-war inflation chaos. Prague thus gained importance in Central European finance, which also helped the development of the Prague Stock Exchange, especially in its struggle with the Viennese competition.
In the interwar period, visitors to the stock exchange had to buy a ticket that entitled them to trade and cost a thousand crowns for the whole year in the 1920s. The applicant had to apply for it and state the name, surname, occupation, address and brief CV, data on property conditions, as well as a link from at least two Prague banks or large department stores.
Securities trading gradually developed to such an extent that the hitherto valid practice of direct trading became unsustainable, and in 1920 the “Prague Counting Bank” was established, which ensured the settlement of stock exchange transactions. It also enabled the introduction of derivative transactions, which, however, did not take much.
The mistake begun by Nazism was communism
In any case, the period of the First Republic was one of the most successful in the history of the Prague Stock Exchange. The culmination was to be its relocation to its new headquarters, which was achieved for the first time in its history. Until then, it was based at seven different addresses. Unfortunately, the summit was soon followed by a bitter end caused by the Nazi occupation. In the first post-war years, efforts were made to resume trade, but they took over with the advent of communism. In 1948, the stock exchange was definitively closed, its assets ended in liquidation and the building was expropriated by the state.
The stock market did not return to Prague until the 1990s. In the spring of 1993, thanks to the support of the French government and with the help of people from the Lyon Stock Exchange, trading began on the Prague floor, which later moved from the leased premises in Na Můstku Street to the newly built Stock Exchange Palace, where it still operates today.