Paris: It Started with the Lyons Bourse

Paris BourseThe Lyons Bourse was established around 1540. Edicts dating from 1572 and 1595 regulated the status of courratiers, or brokers, in major towns and cities throughout the kingdom. A royal order issued in 1639 replaced the name courratier with agent de change for persons trading in securities and commercial bills. Paris, however, still had no organized stock exchange, even though the first list of agents de change was published in 1684.

Despite several major business endeavors to compete with the Dutch and English East India companies—such as Richelieu’s efforts in creating the Compagnie du Morbihan—French capitalists shied away from risk. Hampered by a lack of resources, many business ventures were only moderately successful.

Between 1716 and 1720, John Law, tried to acclimate the French to “paper money” by issuing and circulating Banque Royale bank notes and offering shares in the Compagnie des Indes, which for the first time were available in bearer form. However, Law was unprepared for France's unwieldy economic and legal system. His experiment ended in bankruptcy and for two generations, the French shunned bank notes, coins, letters of credit and transferable securities.

Nonetheless, efforts to organize the market continued. In 1724, an order of the Royal Council of State authorized the creation of a stock exchange in Paris. (Under article XI, women were refused admittance under any pretext whatsoever, a measure finally repealed in 1967.) Another order from 1774 created a special trading area within the Bourse called the parquet (floor). This was reserved for agents de change, who were required to shout out market prices—hence the term "open outcry."

Nevertheless, many people, including prominent citizens, were unconvinced of the exchange’s value. Mirabeau in his "Pamphlet On The Shares of Compagnie des Eaux de Paris," dismissed as "a fantasy" a plan by the Perrier brothers to issue shares to finance a water supply system for the capital. Distrust of paper money grew even stronger under the Revolution with the spread of assignats (promissory notes) and the financial collapse of the Directoire.

The agents de change corporation was disbanded in 1791 and trading was done without intermediaries. In the turmoil of 1793, the Bourse was closed and joint-stock companies were abolished. On September 9th, 1795, the Bourse was closed ‘permanently’—only to reopen on October 20th with 24 agents de change.

French Stock Exchanges Gain Official Status

The Consulate and the First Empire created a framework for an organized economy. For the first time in France, powers and duties in both the public and professional spheres were regulated:

•  The Banque de France was given the right to issue banknotes
•  Joint stock companies could only be formed with State authorization
•  Officially appointed intermediaries were granted a monopoly in securities trading.                

Article 76 of the commercial code gave legally constituted agents de change the sole right to deal in government securities and other tradable bills. They were also entitled to trade on behalf of third parties in letters or bills of exchange and all other commercial instruments, and to officially establish prices.

In 1801, the Paris Bourse was officially recognized, and the number of agents de change, set at 60 in 1786, was increased to 71. Construction of the Palais Brongniart – the building that was to house Paris Bourse for over a hundred and fifty years – began in 1807 and was completed in 1827. As France established financial institutions, built canals and railways and expanded its industry and trade, the stocks quoted on the Paris Bourse increased exponentially, from seven in 1800 to 152 by 1853.

In July 1867, an act of parliament eased the way for raising capital by organizing sociétés anonymes (limited companies) and scrapping the requirement for government authorization for companies with capital exceeding 20 million francs. In 1900, more than 800 French securities, both public and private shares and bonds, and nearly 300 foreign stocks were quoted daily by agents de change in Paris. The Bourse was open for trading from Monday to Friday between noon and 3pm.

The provincial stock exchanges were also modernized: Lyons in 1845, Bordeaux in 1846, Marseille in 1847, Lille in 1867, Nantes in 1868 and Nancy in 1922. The Toulouse Bourse was closed in 1967.

Securities excluded from the agents de change's official list were traded in Paris via banquiers en valeurs mobilières (securities bankers) on an unofficial market called the coulisse. This market was held under the colonnade of the Palais—Brongniart, exposed to the elementshence the name pieds humides ("wet feet") given to traders: Period engravings show them huddled together in tight crowds in the pouring rain. These intermediaries certainly contravened the principles of Article 76 of the commercial code, but their activity arose out of economic necessity. They were made legal in 1855 and, in 1942 and 1945, were given a recognized status of courtiers en valeurs mobilières (brokers in stocks and shares), with the right to hold their market inside the Palais Brongniart.

A Single, National Company

In 1962, to streamline France's stock markets, the trading of securities not included on the official list was transferred to the agents de change, thus putting an end to the role of the courtiers. At the same time, the government created 18 new agent de change offices solely for former courtiers, raising the official number of agents to 85.

Five years later, the Act of 28 December 1966 and the decree of 30 March 1967 dissolved the Compagnies d'Agents de Change (each exchange had its own company). On 2 May 1967 a single national company was established composed of the 118 agents operating on the seven French exchanges.

The same legislation permitted agent de change offices to merge in order to  secure the financial base needed to develop the market and new lines of business, such as investment advice and portfolio management. The number of offices gradually shrank from 118 to 61 over the following ten years.

Opening Up To Competition

The 1980s were a decade of consolidation for financial markets and economies throughout the world. In France, the decade also saw the modernization of institutions and a radical change in stock market techniques, with the transition to electronic trading.

Efforts by the Finance Ministry to modernize the Paris market resulted in the launch of a futures exchange, MATIF, on 20 February 1986, to trade contracts on government bonds. A year later on September 10, 1987, an equity options exchange, MONEP was launched. In 1988, the MATIF added commodity contracts to its range of products.

The Stock Market Reform Act of January 1988 enshrined a radical change in the status of market participants. This law dissolved the Compagnie des Agents de Change and, in its place, created the Société des Bourses Françaises, incorporated as a limited company.

The agents de change themselves were replaced by sociétés de bourse, or bourse member firms, and membership of the exchange was transferred from state-appointed individuals to commercial companies governed by ordinary law. Member firms were authorized to undertake all securities-related activities, from preparing new issues to managing private portfolios and mutual funds, from dealing and trading to market making.

All that remained was to fully integrate the French market into Europe. This was accomplished by the Financial Activity Modernization Act of 2 July 1996, which transposed the EU Investment Services Directive into French law and paved the way for greater openness and competition.

With the new law, sociétés de bourse lost the trading monopoly inherited from the agents de change. Banks were given access to the markets; the Paris Bourse lost its monopoly; and intermediaries were no longer obliged to trade through the Paris markets. On the other hand, the Paris Bourse was free to establish a European-wide network. And on 1 June 1999, France's four market operators—SBF, Matif SA, Monep SA and Société du Nouveau Marché—merged to form a new company, ParisBourse SBF SA.

In September 2000, the Amsterdam, Brussels and Paris bourses merged to create Euronext, the first pan-European exchange. Euronext subsequently expanded to include the Portuguese stock exchange and London's International Financial Futures and Options Exchange (LIFFE).