I

Competition amongst stock exchanges has gained substantial attention recently with the failed attempt of the London Stock Exchange to merge with Deutsche Börse.Footnote ¹ The rationale for mergers is relatively easy to understand. Since stock exchanges are meant to centralise trades – with the evolution of online platforms towards common order books – it may seem optimal to concentrate all trades in a single venue to exploit economies of scale (Malkamaki Reference Malkamaki1999; Keim and Madhavan Reference Keim and Madhavan2000). The existence of local exchanges seems at first sight harder to justify. Several explanations have, however, been offered: local exchanges would allow catering to the specific needs of different segments of investors; they would also appeal to investors valuing face-to-face contact or a local market for which it is easier to get information (Ramos Reference Ramos2003). When the capacity of an exchange is fixed, congestion may furthermore limit the interest to concentrate all trades in a single venue (Davis, Neal and White Reference Davis, Neal and White2007). In view of the importance of communication, mergers of exchanges located in places with different cultures or languages may also limit the gains from the merger (Ramos Reference Ramos2003). Eventually, investors with access to local information seem to outperform those without. Evidence from the equity trades of 756 professional traders located in eight European countries on a German electronic trading system shows that traders located outside Germany in non-German-speaking cities make lower proprietary trading profits (Hau Reference Hau2001). Informational advantage seems, however, to be not only a function of location but also of size. Indeed, according to Hautcoeur and Riva (Reference Hautcoeur and Riva2013, p. 322), the largest financial institutions would favour trading ‘in opaque and decentralised markets to maximise their informational rents’.

Mergers across exchanges are thus important in finance. Economic historians have tried to understand the merger process across several countries. In many countries the number of local exchanges at some point in time is striking. For instance, in a country as small as Belgium, at the end of the nineteenth century, transactions in securities were taking place, more or less regularly, in no less than ten regional exchanges (Willems Reference Willems2002). Competition amongst exchanges was present even in a small country. Up until 1830, the Brussels stock exchange was in the shadow of Antwerp. Once Belgium became an independent country Brussels’ market share grew dramatically (Veraghtert Reference Veraghtert and De Clercq1992). At the same time in France, stock markets existed in Bordeaux, Lille, Lyon, Marseille, Nancy, Paris and Toulouse. Ducros and Riva (Reference Ducros and Riva2017) analyse the evolution of regional exchanges in France. They show that Lyon managed to get the largest share of trades for provincial exchanges, jumping from a market share of provincial trades of 30 per cent in 1871 to 59 per cent in 1913. For the United Kingdom, Killick and Thomas (Reference Killick and Thomas1970) list stockbroking firms in 13 provincial cities in 1861. The gradual evolution from many local exchanges to a few national exchanges (or just one) has taken over a century to materialise in most countries.

The merger process was characterised in many countries by the competition existing amongst the different markets but also in some instances between bankers and brokers. This was, for example, the case in France, where banks played an important role (Hautcoeur and Riva Reference Hautcoeur and Riva2012). Hautcoeur and Riva (Reference Hautcoeur and Riva2012) suggest that by the end of the nineteenth century banks’ growing role in security issues and trading represented the biggest challenge faced by the Parquet (the official stock exchange). Banks were furthermore suspected of matching directly buy and sell orders from their clients without using the services of a broker, as was legally mandatory. The competition was not limited to banks. In Paris, official brokers faced the direct competition of the Coulisse (the parallel market existing at the time). According to Hautcoeur and Riva (Reference Hautcoeur and Riva2012), one should, however, view the relationship between the Parquet and the Coulisse not only as one of pure competition but rather as cooperative competition. They furthermore argue that ‘in line with recent theoretical developments, … the juxtaposition of heterogeneous organisations had important virtues for market participants, since it allowed the exchanges to specialise in different investors and services and made the exchanges complementary to each other’ (Hautcoeur and Riva Reference Hautcoeur and Riva2012, p. 1326). Competition came also from provincial exchanges. Oosterlinck and Riva (Reference Oosterlinck, Riva, Baubeau and Ögren2010) show that during the interwar period local exchanges in France were gradually losing market share. The split of the country into two zones, following the defeat of May 1940, provided a boost to the Lyon stock exchange. However, once the war was over, concentration resumed, ending in a general merger in 1991.

In New York, the Consolidated Exchange was a major actor between 1885 and 1925, even beating the New York Stock Exchange (NYSE) from time to time in terms of volume of trades (Brown et al. Reference Brown, Mulherin and Weidenmier2008). In the United States competition was, however, not limited to the competition within one city. White (Reference White2013) analyses the competition between the NYSE and the Consolidated and regional exchanges for the period 1900–33. In general, one observes a movement towards concentration of trades, but his study also shows that the general concentration pattern may exhibit reversals. Most notably, during the boom years, local exchanges and the curb increased their market share. White (Reference White2013) attributes this observation to the emergence of new and risky industries that were not easily accepted by the NYSE but welcomed by local exchanges with more lenient standards in terms of listing and disclosure requirements.

The literature has thus investigated competition amongst stock exchanges for many countries. However, and despite its importance as a financial centre, the historical literature dedicated to the Swiss financial industry remains scarce (Cassis Reference Cassis1991; Guex and Mazbouri Reference Guex and Mazbouri2010).Footnote ² And to the best of our knowledge no study has attempted to analyse the competition between stock exchanges. This article aims to partially fill this gap by focusing on the Geneva stock exchange during the interwar period. The interwar period is of particular interest because the financial turmoil experienced by most developed countries had a direct effect on the Swiss financial industry. Secrecy laws were already present before World War I, but their importance for investors willing to escape fiscal pressure increased dramatically with the war (Guex Reference Guex1999). The interwar period also led to a reorganisation of the Geneva stock exchange. This reorganisation should be read using a double competition grid: the competition between banks and exchanges on the one hand, and the competition between French-speaking and German-speaking exchanges on the other.

Sections ii and iii will try to shed some light on the developments behind the power struggles of these two axes of competition, and on the reasons behind the tilt of the previous equilibriums. Conclusions will be drawn in Section iv.

II

The Geneva stock exchange was created by an association of stockbrokers in 1850. At the time, there was no legislation in Geneva related to stock markets and the new undertaking was free to decide how to organise its trades (Bordier Reference Bordier1904, p. 12). An open outcry system was instituted in 1855. A year later, a law was passed regulating the exchangeFootnote ³ (Meier and Sigrist Reference Meier and Sigrist2006, p. 27). In February 1858 the rules of the stock exchange were modified. In order to guarantee the safety of the exchanges and, as a corollary, their job of intermediation, the stockbrokers created a closed-system that allowed admission only to those who had been sponsored by at least two brokers and who had been working for at least one year for an established broker. Capital requirements were substantial (200,000 CHF) and brokers had to set aside a lump sum of 50,000 CHF to guarantee their trades and limit counterparty riskFootnote ⁴ (Bordier Reference Bordier1904, p. 23). Both spot and forward trades were allowed.Footnote ⁵

Until 1875, Geneva hosted the only stock exchange in Switzerland, hence its success at the time. In practice, the Geneva stock exchange was open to the public. This would remain a trademark of Geneva, the other stock exchanges that were founded later, Basel in 1866 and Zurich in 1873, refusing the public.Footnote ⁶ Trades were at first conducted by brokers on a single pit. The organisation of the exchange remained almost unchanged up until 1930. Afterwards the organisational changes should be viewed in terms of competition between cities (Geneva versus Basel or Zurich), but also between bankers and brokers, in terms of job functions and access to them. As will be detailed further, in just a few years after 1930, the Geneva stock exchange moved from an organisation in which Geneva brokers had the upper hand to one dominated by bankers originating from the German-speaking part of the country.

During the 1920s, bankers repeatedly asked for direct access to the exchange.Footnote ⁷ Instead of relying on brokers, they wanted to be able to conduct their trades directly, as was the case in Basel or in Zurich. There was a clear financial motivation to be allowed to trade directly since, for similar operations, Swiss bankers were generally charged more than members of the exchange. In parallel, clients and foreign banks usually paid an even higher fee, with clients sometimes paying more than foreign banks. The bankers decided then to create an association to defend their rights on the stock exchange, the Commission des Banquiers près de la Bourse.Footnote ⁸ Its board was composed of a member designated by the Union Financière, the head of a Geneva bank, and the head of a Swiss German bank. Their lobbying action allowed them to reduce the difference in fees even though discrimination persisted.Footnote ⁹

The institutional setting remained unchanged up until the middle of the interwar period. Even though bankers were willing to have a bigger say well before this date, it was only in 1928 that the Geneva government began investigating the need to change the existing structure.Footnote ¹⁰ According to the stockbrokers, two elements played an important role in this respect: fiscal motivations but also the examples of Zurich and Basel where bankers were allowed to trade directly on the market. A first commission was created in June 1928. Its conclusions favoured a dramatic change, but a minority report pleaded for the status quo.Footnote ¹¹ As a result, a second commission, created in July 1929, suggested creating a new institution which would concentrate the powers from the Commission des Banquiers, the stockbrokers’ association (Syndicat des Agents de Change) and the Comité 3-6-9.Footnote ¹² The discussions leading to the creation of this body forced the stockbrokers to relinquish the monopoly they had on the admission of new securities to the exchange and of course the freedom they had experienced regarding the rules and regulations of the exchange.Footnote ¹³ Brokers wanted to keep trades in their hands.Footnote ¹⁴ They were also opposed to the creation of more than one trading pit (corbeille). On 22 May 1930 a general assembly of the ‘users of the Geneva stock exchange’ examined the proposed rules and regulations for the future Chambre de la Bourse de Genève,Footnote ¹⁵ a new version of the former stock exchange, now officially recognised by the Canton of Geneva.Footnote ¹⁶ These rules were in line with the wishes of the Geneva stockbrokers, and as local brokers and bankers formed a majority, the document was accepted.Footnote ¹⁷ Following the creation of the Chambre de la Bourse, which now integrated the various parties that had so far been lobbying against each other, the Commission des Banquiers près de la Bourse disappeared.Footnote ¹⁸

The new rules were not to the taste of five of the main Swiss banks, headquartered in the Swiss German part. The Eidgenössische Bank,Footnote ¹⁹ the Schweizerische Kreditanstalt,Footnote ²⁰ the Schweizerische Volksbank,Footnote ²¹ the Schweizerische BankvereinFootnote ²² and the Schweizerische BankgesellschaftFootnote ²³ wrote a minority note stressing the illegal character of some of these articles.Footnote ²⁴ The tone of the note was fierce and suggested that legal action was likely to ensue. The main bone of contention was the fact that trades would occur in a single pit. Despite this opposition, the Council of State of Geneva (Conseil d'État de Genève) ratified the new statutes on 2 September 1930, which were formally accepted by the newly created Chambre de la Bourse de Genève on 5 November 1930.Footnote ²⁵ At the end of this first round, the financial institutions originating from Geneva (brokers and bankers together) had joined forces against the Swiss German banks. This ‘alliance’ would, however, end quickly.

Despite this setback, the main Swiss German banks mentioned earlier did not consider they had lost the battle. To circumvent the new rules, the five persons representing these banks at the assembly of the ‘users of the Geneva stock exchange’ asked the government to register them officially as brokers.Footnote ²⁶ Once this was done, in December 1930, they asked to be admitted to the Chambre de la Bourse, with the intention of opening a second pit. The second pit was clearly intended to be a place where banks’ representatives would be able to trade together.Footnote ²⁷ The admission of these new brokers was refusedFootnote ²⁸ as they were accused of being ‘bankers in disguise’, but also because in practice it would have given two votes to each of the banks involved,Footnote ²⁹ because of the vote given to brokers (who were not supposed to represent banks or to be bank brokers so far) plus the vote given to the banks in the assembly. Simultaneously, the general assembly refused to allow the creation of a second pit as its members felt it was useless since securities traded on this pit would not be different from the ones traded in other pits.

Following this action, the Chambre de la Bourse began a lobbying action to convince the Geneva government that their point of view was not only valid but also in line with the interests of the local economy.Footnote ³⁰ In a letter addressed to the President and Members of the Conseil d'État de la République et Canton de Genève, the President and Vice President of the Chambre de la Bourse highlighted the legality of their action. Since the Council of State of Geneva had the ability to force the Chambre de la Bourse to accept these brokers, the signatories of the letter stressed all the negative consequences their admission would bring. First, accepting them would question the independence (from bankers) of the stockbrokers and jeopardise the market trading mechanisms. Second, and this is implicit in the letter, accepting these new members would reduce the power of local institutions. The authors of the letter stressed that these five houses ‘try to destroy an organisation in line with the wishes of the population of Geneva and of the 31 financial institutions of Geneva’.Footnote ³¹ Their admission would threaten the existence of local financial institutions, pits of dubious quality would increase in number and the open outcry system would work less efficiently, as was the case in Zurich, according to the authors. Eventually, the authors stressed that differentiation was the only way for the Geneva exchange to counter the growing importance of Zurich. Differentiation would, according to the members of the Geneva exchange, guarantee survival as potential investors would recognise the impartiality of the brokers.Footnote ³² Furthermore, the way trades were conducted in Geneva was more likely to appeal to investors from the Anglo-Saxon world and from Latin countries.Footnote ³³ The local press also entered the game, the Bulletin Financier Suisse denouncing the schemes and plots of the Swiss German banks, accusing them of having joined forces with the socialists.Footnote ³⁴

The Swiss German banks did not leave the matter there. In April 1931, the main banks denounced a convention that had existed since 1925. This convention guaranteed that banks would use the services of brokers to conduct the trades occurring in the morning. In other words, it prohibited the so-called ‘franco’ transactions, i.e. transactions which were done between banks without the services of brokers.Footnote ³⁵ These franco transactions are similar to the ones conducted, illegally, by many French banks at the end of the nineteenth century. From April 1931 on, banks thus began to engage in franco transactions on the premises of the stock exchange.Footnote ³⁶ The banks in Geneva followed their peers in other parts of the country.Footnote ³⁷ In 1935 banks were still trading together without using the services of brokers, who complained to the Président du Conseil d'État de la République du Canton de Genève.Footnote ³⁸ Their letter shows the dire straits in which brokers found themselves. In their appeal to the Président du Conseil d'État, they stressed the decline in business due to the failure of several banks (Banque de Genève and Banque d'Escompte Suisse, to mention two of the largest). In their eyes, bankers were guilty on two counts: by failing they had reduced brokers’ business, and by engaging in franco transactions they were further hurting them. Brokers were prompt to dismiss the claim made by banks that using their services would expose them to too high a counterparty risk. They presented the issue as a matter of life and death, highlighting in their signature that some 50 jobs were at stake.

In June 1936, the Zurich stock exchange contacted the other Swiss exchanges (of Bern, Basel, Geneva, Lausanne, Neufchâtel and Saint Gall) to create an association of Swiss exchanges which would enable stock exchanges to share competences and standardise practices. The French-speaking exchanges were at first reluctant, believing that standardisation would in the long run harm them, but the fear that the federal government would pass a law regulating exchanges prompted them to change their position.Footnote ³⁹ Eventually, the Geneva stock exchange joined the Association of Swiss Exchanges in February 1938.Footnote ⁴⁰ The statutes of the new structure provided that the number of representatives from each exchange would be proportional to the number of members of each exchange. In practice, this meant that Geneva would send four representatives, and Basel and Zurich would send three each.Footnote ⁴¹ The Geneva exchange also adhered to the rules of the Instance Suisse d'Admission des Valeurs Etrangères, even though the new body was in fact reducing the prerogatives of the exchange.Footnote ⁴² The aim of the admission board was at first to give advice regarding the listing of foreign securities, but it gradually came to be consulted for all new loan issues.Footnote ⁴³

On the organisational side, the rearguard actions undertaken by the brokers were in vain. To the best of our knowledge, no brokers attempted to sue bankers engaging in franco operations and it seems that gradually members of the exchange accepted the practice. By 1942, the Société des Banques Suisses (SBS; also known as the Swiss Bank Corporation, SBC) had become the most active actor on the Geneva stock exchange, its business representing approximately 20 per cent of the total traded volume (Perrenoud et al. Reference Perrenoud, Lopez, Adank, Baumann, Cortat and Peters2002, p. 79). On 1 January 1945, the Geneva stock exchange modified its structure once more. The decision to change the organisational structure, taken in November 1944,Footnote ⁴⁴ stemmed from the low liquidity observed on the exchange. To address this issue, it was deemed crucial to centralise all trades in one pit. Therefore it was necessary to convince bankers and brokers to cooperate. Eventually bankers were allowed to trade directly like any other broker. The new board would be represented by three members from private banking, three members from the major (Swiss German) banks and two members not belonging to either of these groups.Footnote ⁴⁵ The second round was thus won by the big banks. The minutes of the November 1944 meeting stressed that four brokers would continue their trade,Footnote ⁴⁶ whilst five were ceasing their activities.Footnote ⁴⁷ Following this decision, the Geneva stock exchange ended up being organised according to the German rather than the French model (Meier and Sigrist Reference Meier and Sigrist2006, p. 49).

On the international side, the Bourse de Genève also tried to consolidate its position and to assert itself as a leading Swiss exchange. When several exchanges in Europe began discussing the creation of an international association of exchanges trading sovereign bonds (Bureau International des Bourses de Fonds Publics), the Geneva stock exchange signalled its interest.Footnote ⁴⁸ The president of the Geneva exchange stressed the important part Switzerland had played in the flotation of sovereign bonds as a reason to include a Swiss member in the association. One of the main goals of the association was to improve the ability to trade securities across borders, but its members were also concerned with the evolution of their environment and were eager to increase their profits through an increase in trades.Footnote ⁴⁹ A representative from Geneva attended the meeting of the association in 1932. Nevertheless, the role played by this organisation decreased as the crisis deepened. Participating exchanges dropped from 30 in 1931 to 12 in 1932 and 7 in the autumn of 1934. In 1935, the only Swiss representative of the association, renamed the Bureau International des Bourses de Valeurs Mobilières, was a member of the Zurich stock exchange.Footnote ⁵⁰

III

The evolution of the stronghold of brokers in favour of bankers happened in a particular environment. In terms of activity, at the end of the nineteenth century the currency trade declined substantially as banks preferred trading directly with each other rather than using the services of the stock exchange (Bordier Reference Bordier1904, p. 34). The international outlook of the Geneva exchange made it vulnerable to an international financial crisis. It suffered, for example, from the consequences of the Anglo-Boer War and the 1907 crisis, as well as from the Balkan Wars (Seitz Reference Seitz1930, p. 94). But international exposure also meant opportunities. Geneva was the first Swiss exchange to open a foreign exchange section (Seitz Reference Seitz1930, p. 95).

During World War I, the Geneva stock exchange was the first Swiss exchange to adapt to the new environment. At the outbreak of war, trades were almost non-existent; nonetheless, the Geneva stock exchange remained open.Footnote ⁵¹ During the first years of the war, the Geneva stock exchange thus faced difficulties. These difficulties were due to the high number of foreign securities listed on this exchange and to the importance of foreign exchange transactions for it, both of which hampered because of the war. Geneva was not the only exchange in trouble and in September 1915 representatives of the Basel, Geneva and Zurich stock exchanges met to discuss a plan of action (Meier and Sigrist Reference Meier and Sigrist2006, p. 38). Gradually, however, Swiss securities came back to Switzerland (Meier and Sigrist Reference Meier and Sigrist2006, p. 37). Transactions resumed and foreign securities, which up till then were not traded in Geneva, began to be listed. According to the Société de Banque Suisse (1917, p. 104),Footnote ⁵² these changes reaffirmed the international character of the Geneva stock exchange. The war also partially severed outside influence regarding stocks: prices that up until then were heavily influenced by prices made abroad began to react independently. As the war dragged on, Swiss bankers began to engage in arbitrage operations to attempt to take advantage of the sharp price changes experienced by foreign currencies (Georg Reference Georg1920). Switzerland was ideally placed to exploit its position as a neutral country surrounded by belligerents. The foreign exchange section, which had suffered at the onset of the war, soon proved to be highly profitable. The war actually allowed the Geneva exchange to occupy an important international position in this trade (Seitz Reference Seitz1930, p. 95).

The financial crisis which started in 1920 had a direct impact on the Geneva market (Seitz Reference Seitz1930, p. 108). The stock exchange was also affected by demands to lift bank secrecy and to raise a tax on wealth (Seitz Reference Seitz1930, p. 108). Campaigns were waged during 1922 and it was only in December of that year that voters decided to keep the status quo (Seitz Reference Seitz1930, p. 109). Trades had declined by the middle of the 1920s, prompting brokers to reduce fees on trades. In January 1926, in view of the limited number of trades for many securities, the Commission de la Bourse asked bankers to act as market makers for the securities they had helped to float on the market; they did this in order to avoid the frequent remark ‘ni demande, ni offre en cette valeur’.Footnote ⁵³

The international outlook of the Geneva exchange forced its members to discuss the actions to be taken regarding foreign securities. In July 1931, the German government imposed a moratorium (standstill agreement) which blocked foreign-owned balances held in German institutions (Faith Reference Faith1982, p. 58). Initially planned for six months, the moratorium was renewed regularly, leading to large losses for German banks’ creditors. The German moratorium drastically affected the trade of German securities as the stock exchange committee stopped quoting German and Hungarian stocks. Difficulties in trading German securities were compounded by the fact that as a result of the negotiations, securities had to be treated differently depending on the nationality of their holder, a distinction being made between German, Swiss and other citizens.Footnote ⁵⁴ Forward trades were banned at the same time.Footnote ⁵⁵ The number of traded securities was further reduced when the UK left the gold standard in September 1931, with only Swiss federal, cantonal and city loans being allowed on the floor.Footnote ⁵⁶ To limit the impact of the crisis, prices were at first not allowed to diverge by more than 10 per cent from their previous value.Footnote ⁵⁷ But a few days later, trading began to resume more or less as usual.Footnote ⁵⁸ In 1932 the stock exchange at first considered suspending trades in the Kreuger shares when the scandal regarding this holding broke out. Nevertheless, for fear that trades in these shares would end up on a black market the brokers kept the shares listed.Footnote ⁵⁹ The exchange rate instability led also the stock exchange committee to try to quote as many currencies as possible.Footnote ⁶⁰ The international monetary turmoil also affected the trades of other securities for which coupons were to be paid with a fixed exchange rate. The reluctance to respect the agreement, for example, led the Geneva exchange to suspend trades for shares from the Société Méridionale d'Electricité.

Following the German invasion of Belgium on 10 May 1940, Swiss stock exchanges were closed. They reopened on 9 July 1940.Footnote ⁶¹ When the stock exchange reopened, most foreign securities were not tradable, but by the end of 1940, business had more or less resumed as usual. During the war, difficulties in transferring shares affected the volume of trades.Footnote ⁶² In January 1943, Swiss exchanges jointly increased trading fees. Foreign securities were affected by various measures. Affidavits were required for some securities (such as an Argentinian one, for example, in 1942Footnote ⁶³). Other securities were transformed from bearer securities to registered ones (Italian securities in 1942, for example). These transformations were not specific to the Geneva exchange as at about the same time similar measures were imposed in France (Oosterlinck Reference Oosterlinck2010). Despite the important number of securities floated during the war, the Geneva stock exchange began losing ground against other exchanges. Cantons, such as Valais, which used to cross-list their loans in Geneva, started to omit this exchange.Footnote ⁶⁴ In all likelihood, these decisions were the consequence of the low liquidity for such securities on the Geneva stock exchange. As early as 1938, brokers were complaining about the low liquidity of fixed-income securities issued by the cantons or by the federal government.Footnote ⁶⁵ Despite this, low-liquidity loans, and in particular loans issued by these entities, represented the vast majority of loans issued on the Geneva stock exchange. Table 1 details the proportion of loans issued on the Geneva stock exchange, by main type of issuer.

Table 1. Proportion of loans issued on the Geneva stock exchange, by type of issuer, between 1932 and 1945 (in percentages)

Notes: The first three columns (a–c) are the components of the fourth one. ^†The amount of Swiss railroad issuances at that time is negligible.

Source: Rapport du Conseil d'Administration de la Société Coopérative de la Chambre de la Bourse à l'Assemblée Générale (1932–46).

Table 1 shows that Swiss public funds represented the bulk of the issues for most years.Footnote ⁶⁶ During the war years, they represented up to 95 per cent of all new issues listed on the exchange. Swiss banks represented another important segment throughout the period. As for foreign loans, their importance varied substantially. Quite logically, there were no issues during World War II. But even before that date members of the stock exchange were complaining about the level of the taxes to issue securities (the timbre d’émission), which according to them hampered the issuance of foreign securities.Footnote ⁶⁷

New issues on the Geneva stock exchange proved to be extremely volatile. For the years for which data is available, it seems hard to discern a real trend. Figure 1 tracks the evolution of the amounts issued for new loans.Footnote ⁶⁸

Source: Rapport du Conseil d'Administration de la Société Coopérative de la Chambre de la Bourse à l'Assemblée Générale (1932–46).

Figure 1. New loan issuances on the Geneva stock exchange, from 1932 to 1945 (amounts in CHF)

New issuances were not large enough to limit the decline in the number of securities listed on the exchange. Figure 2 provides the evolution of the number of securities listed in Geneva. From close to 600 in 1931 the number fell to below 500 in 1939, to stabilise around 480 during the next years. Overall, this represents a decline of close to 20 per cent in 15 years.

Source: Rapport du Conseil d'Administration de la Société Coopérative de la Chambre de la Bourse à l'Assemblée Générale (1932–46).

Figure 2. Number of listed securities (bonds and equities), at year's end, from 1930 to 1945

The activity on the exchange declined as the years passed. The trend is clear in Figure 3, which provides the yearly turnover on the Geneva stock exchange from 1931 to 1945. The data come from the yearly reports of the Geneva stock exchange. Figures are given directly in the report for 1931 to 1933 and estimated on the basis of taxes for the other years.Footnote ⁶⁹

Source: Rapport du Conseil d'Administration de la Société Coopérative de la Chambre de la Bourse à l'Assemblée Générale (1932–46).

Figure 3. Yearly turnover on the Geneva stock exchange, from 1931 to 1945 (amounts in CHF)

Figure 3 shows a sharp decline in volumes from 1931 to 1934, with trades resuming in 1935, to peak in 1937 before experiencing another slump. This observation is close to the one reported by Lussy et al. (Reference Lussy, Bonhage and Horn2001) for Zurich. It reflects the effect of the world crisis that started in 1929. French and US provincial exchanges experienced a similar pattern during the interwar period (Dubost Reference Dubost1938; Oosterlinck and Riva Reference Oosterlinck, Riva, Baubeau and Ögren2010; White Reference White2013). Joly (Reference Joly2017) reviews share issues in Lyon and shows that applications for shares experienced a dramatic drop in the 1930s. A strong increase in trades during the 1920s was followed by a strong decline after the crash. The only difference between the two cases resides in the time at which the decline began: it occurred as early as 1929 in the US, but only in 1933 in the French case. The general decline observed on the Geneva exchange seems consistent with this pattern. Before the stock market crash regional exchanges were increasing their market share, a movement brought to a halt by the crash. Without data from other Swiss exchanges and with data starting only in 1930 it is impossible to show that the same pattern occurred in Switzerland. Nonetheless, regarding the general decline observed after 1930 in Geneva, one might conjecture that Swiss exchanges experienced a similar movement towards concentration.

The recovery that blossomed in 1934 was fuelled by the devaluation of the Swiss franc in 1936,Footnote ⁷⁰ but turned it out to be short-lived. Nonetheless, this rebound allowed the Geneva exchange to enter the war period in relatively better shape than French provincial exchanges which were at the time described as moribund (Dubost Reference Dubost1938). This was not the first time regional stock exchanges had faced difficulties: at the end of the nineteenth century, the Lyon stock exchange had had to fight for its survival (Ducros and Riva Reference Ducros and Riva2014; Ducros Reference Ducros2018). In the case of Switzerland, the war limited transfers with foreign markets significantly, but it had a positive impact on the prices of Swiss securities.Footnote ⁷¹ Considering this element, it is safe to say that volumes diminished considerably during the war. It was only at the very end of the war that trading volumes began to recover.Footnote ⁷² By contrast, in occupied France, Lyon exploited the division of the country and the creation of an unoccupied zone ruled by the Vichy government to expand its trades (Oosterlinck and Riva Reference Oosterlinck, Riva, Baubeau and Ögren2010; Ducros Reference Ducros2018). Other provincial exchanges located in the so-called ‘Free zone’, such as Marseille, also benefited from the change brought by the occupation. The increase in the market share of these provincial exchanges disappeared, however, as soon as the country was liberated.

IV

Despite its importance as a major financial centre, little is known about Geneva's financial marketplace during the interwar period. This article presents the evolution of the Geneva stock exchange during this period. It shows that the exchange experienced a gradual decline in activity, as was the case for provincial exchanges in other countries at the time (France, for example). On the organisational side, the Geneva stock exchange changed dramatically between 1914 and 1945. During the first quarter of the twentieth century, brokers from Geneva had the upper hand. The power within the exchange shifted during the 1930s and by the end of World War II the exchange was dominated by the major banks of the Confederation.

Without archival evidence from the main banks, it is hard to determine what prompted these banks to adopt a strategy that eventually allowed them to gain more and more control on the Geneva stock exchange. The need to limit trading costs was certainly the element which triggered their intervention, but they could have adopted other approaches to reach this end. One possibility would have been to push for a merger of the Swiss exchanges. Since both Zurich and Basel accepted that banks traded directly this would have solved their problem. This course of action was, however, not adopted. Several elements may have played against this approach. First, at the time stock exchange mergers were uncommon. Even though at the international level there were calls for closer cooperation, mergers seem not to have been on the agenda. Second, differences in language and culture would have limited the gain from the merger. Third, if one follows the arguments presented by Hautcoeur and Riva (Reference Hautcoeur and Riva2013), as large financial institutions, the main banks had an interest in keeping several exchanges. The reaction from the brokers in Geneva also warrants discussion. Archival evidence shows that they never really envisioned a closer cooperation with the other Swiss exchanges. Closer cooperation with the other Swiss exchanges would in all likelihood also have led to a larger say from the banks. Local banks, which at first sided with the Geneva stock exchange, opted relatively soon to side with the other banks. As a result, the local brokers were left with no alternative but to ask for the support of the local government.