Abstract

This paper analyses the regulation of stock exchanges and broker-dealer activities in Italy, US and main European countries at the beginning of the twentieth century, taking as a reference a document prepared by the Bank of Italy that can be date approximately around that time. The paper shows how the Italian regulation on stock exchanges issued in 1913 was largely similar to that prevailing in France (except for the concentration principle - whereby any transaction on listed securities had to be executed on the exchange -, absent in the Italian regulation). The main consequence of the regulatory framework prevailing in France and Italy was to make the securities trading industry very fragmented, although entry barriers for individual brokers remained quite high. In fact, brokers (so called "agenti di cambio") were requested to pay an extremely high initial cautionary deposit to start their activity and at the same time were forbidden to organize themselves as joint stock and limited liability companies, to act as principal to any kind of transaction or to offer bank-like products. The impact of the self-regulation imposed by the London Stock Exchange (LSE) on its members had largely the same effect of the statutory regulation of European countries of civil law tradition, in the sense that the role of banks and other financial intermediaries in the business of securities trading remained quite marginal. In contrast to the U.K. and other European countries (except for Germany), commercial banks were the most important members of the New York Stock Exchange (NYSE) until the adoption of the Glass-Stegall Act in 1933.