Experiments in Stock Exchange Industry Regulation

The Paris Bourse, 1893 – 1898

Pierre-Cyrille Hautcoeur, EHESS-PSE

Amir Rezaee, ISG-LEO Université d’Orléans

Angelo Riva, EBS-PSE[1]


We study the causes and the consequences of changes in regulation affecting the degree of competition among stock exchanges. The debate on the virtues of fragmentation vs. consolidation of securities markets has recently been reopened by the Mifid directive of the European Union and NMS regulations in USA. Empirical assessments of these two options are rare because few substantial changes do occur at this level. The history of the Paris exchanges provides an interesting empirical test, since two changes in opposite directions occurred in the late 19th century, when Paris was the second financial center in the world. In 1893, the competition between the two Parisian markets was sharpened by a fiscal law eliminating the monopoly of the official market; in 1898, another law brought it back and provided fiscal tools for their enforcement which lacked before 1893. We analyze the impact of these two changes on the competition between the exchanges in terms of securities listed, traded volumes, spreads and co-integration. We find that consolidation reduced significantly transaction costs for investors without harming other dimensions of effectiveness.

JEL codes: G14 G18 G24 N13 N23 N43


Monday 27th June 2016, 15:00 – 16:00


IMES, Bank of Japan

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