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Prague Stock Exchange

150 years of the Prague Stock Exchange: Enthusiasm against adversity of the Establishment

Let it serve for centuries the economic prosperity of the Czechoslovak Republic, it said 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 after its launch. Unfortunately, those "ages" lasted only until March 1939, when Czechoslovakia was occupied by Nazi Germany and stock exchange trades gradually languished, until the activities of the stock exchange ceased completely in 1943. It has been waiting for its renewal for 50 long years. It characterizes the complex, now 150-year history that stock exchange trading in the Czech capital has undergone.

The development of the stock exchange in the territory of today´s Czech Republic was marked by the domination of bureaucratic supremacy in the days of the Habsburg monarchy, the long-term lack of support from the state, economic ups and downs, but also the enthusiasm and desire of Czech business circles for their own securities and commodities 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 the era of 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 created in Europe as early as the 12th century. In the Czech lands, the efforts to create own stock market date back to the reign of Maria Theresa, during whose reign the Vienna Stock Exchange was established in 1771. Prague had to wait another hundred years. The creation of a major economic institution subject to state supervision required the permission of the authorities.

Thus, it was not until 1871 that a subscription of 29,870 gold coins from 389 founders secured the necessary finance to establish and maintain the stock exchange, which inaugurated its operation. The first stock exchange meeting and, in fact, also the first stock exchange trades took place on April 17, 1871, between 11:30 and 13:00 in Na Příkopě Street in premises more reminiscent of a goods store.

Until the establishment of the Republic, long-term visitors who had the right to participate in trades were considered members of the Exchange. The law only defined who does 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 whose bankruptcy was ongoing or were punished for bankruptcy. They were not allowed on the stock market for three years after completing their sentence.

The stock trade was small at first, for “a wider audience, not quite familiar with the nature of the stock market, took only a modest part in it.” But interest gradually increased, culminating in the spring of 1872. But the market overheated, followed by a collapse in rates. After some recovery, another blow came in the form of a decline 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 market struggled for more or less decades from then until the Republic was established. And although the commodity trade was in the name, it had never been more important in its history.

Better times with Rašín's support

In 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 was valid for trading and cost a thousand crowns for the whole year in the 1920s. The applicant had to apply for it and give name, surname, occupation, address and brief curriculum vitae, details of assets and references 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 Clearing Bank" was established, which ensured the settlement of stock exchange transactions. It also allowed derivative trades to be introduced, but they didn't really take off.

The destruction started by Nazism was perfected by 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 highlight was to be the relocation of the stock exchange to its new headquarters, which it achieved for the first time in its history. Until then, it was located at seven different addresses. Unfortunately, the peak was soon followed by a bitter end brought about by the Nazi occupation. In the first post-war years, efforts were made to resume trade, but they fell apart with the rise of communism. In 1948, the stock exchange was definitively closed, its assets ended up 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.

#PSE as the main market operator since 1871

Prague Stock Exchange (PSE) is the largest and oldest organizer of the securities market in the Czech Republic. A stock exchange is a market where the price of securities or commodities is determined on the basis of supply and demand. The main task of a stock exchange is to bring together investors who want to increase the value of their funds and companies which want to gain new capital. It thus fulfils an important function for the entire national economy. The stock exchange’s activities and capital market operation are supervised by the Czech National Bank.

Trading on PSE is conducted via licensed securities traders who are also the Exchange Members. These are primarily the major banks and brokers. If a common investor decides to invest in the exchange, he/she needs to contact one of the Exchange Members.

Significance for investors:On the stock exchange, investors may purchase and sell securities at any time to generate profit. And why do investors choose the Prague Stock Exchange? Because of high dividends and knowledge of local companies, for example.

Investors' Guide

Significance for companies: An initial public offering provides companies with sufficient capital to be used to finance investments and research or, for example, penetrate other markets. The PSE offers several markets suitable for different types of companies – from the elite Prime Market for large companies to START Market for smaller and innovative Czech companies.

Issuers' Guide Exchange Palace

PSE and its subsidiaries form the PX Group. In addition to the Exchange, the most important member in the Group is Central Securities Depository Prague (CSD Prague) which has a dominant position in the area of settlement of securities trades on the Czech capital market. PX Group also co-operates with POWER EXCHANGE CENTRAL EUROPE (PXE) which offers power and gas trading.

PSE closely cooperates with Vienna Stock Exchange (Wiener Börse). At the international level, this cooperation enables joint measures to increase the visibility of both markets and to acquire professional market participants such as data vendors and index licensees, institutional investors and trading participants for the member exchanges.

PSE is a member of the Federation of European Securities Exchanges (FESE), and the US Securities and Exchange Commission (US SEC) included PSE on its list of exchanges safe for investors by granting it the status of “Designated Offshore Securities Market”.