Foundation of the Belgrade Stock Exchange

The First Ideas About Stock Market

Many people would be surprised by the fact that the stock market history in our region had begun long before the domestic stock market was established. Trading was conducted on the stock exchanges which had already been developed at that time, dominantly at Vienna stock market. Evidence could be found in the newspapers "Novine Serbske", which were issued in Vienna from 1813 to 1822 in Serbian language. Already in 1817, "Novine Serbske", which had more than 1,000 subscribers among Serbs, in each issue gave daily reports on turnovers on the Vienna stock market, which was founded by the royal patent on August 1st 1771. According to these reports, most traded instruments were government securities, i.e. bonds with an interest rate of five and one per cent, gold and silver coins, as well as paper money. Transactions were concluded on daily (SPOT) and forward markets. Goods were also in the center of trader’s attention, mostly grain and livestock.

Seeing how trade is done in the world, in the thirties of the 19th century local dealers understood the need for establishing a special place, an institution that would formalize until then officially unregulated business relationships between retailers, based solely on mutual trust. Mr. Panta Hadzi Stoilov, Belgrade’s “bazerđanbaša” (similar to the Minister of Trade) at Knežev Dvor turned to the ruler Milos Obrenovic with a request to establish a stock exchange on which goods and money could be traded. The Prince, which was a former pig merchant, had a flair for business. From the Belgrade Pasha he rented farries, and paid Đumruk (customs) and Harrach (taxes) in turkish “groš”, which was constantly loosing value. On the other hand, Prince charged services in the Austrian currency - Cvanciger, earning from the foreign exchange differences. Realizing that such institution, which would contribute to the exchange rate harmonization and reduce price fluctuations, would damage his position, the Prince decided to delayed founding of a stock exchange for some other times.

Foundation

Belgrade stock exchange had to wait for another six decades until the official establishment. During the reign of King Milan M. Obrenovic a number of laws were passed to harmonize with the then Western-European legislation. One of these Laws was the Law on Public Stock Exchanges that the National Assembly passed on November 3rd 1886, and which was signed and approved "by the grace of God and the will of people by the King of Serbia Milan M. Obrenovic ". However, institutions that would suite expanding market, increasingly complex trade relations and growing economy were not established until the end of the nineteenth century. The Serbian Trade Association played a key role as it had a big influence on the development of the entire Serbian trade, and on whose initiative the Law on Public Stock Exchanges was passed. With the aim of strengthening and expanding Serbian economy, members of Serbian Trade Association launched an initiative to establish the Stock Exchange.

Stock market was supposed to give a momentum to the economic emancipation, strengthening and expansion of Serbian economy. Following the current situation, at the meetings of the Association it was decided to establish the general stock exchange for all kinds of brokerage operations, based in Belgrade, as a commercial, political and cultural center. However, eight years passed from the adoption of the Law on Public Stock Exchanges until the foundation and start of the Belgrade Stock Exchange. Statute of the Exchange, which was developed by a special committee, was approved and endorsed by the Ministry of Economy on 3rd October 1894, provided the legal basis for the operations of the Belgrade Stock Exchange. Invitation sent to Serbian traders to enroll for the Members of the Exchange had a great response. All prominent traders, from Belgrade and outside, applied. By this all requirements were fullfilled so the Constitution Assembly of the Belgrade Stock Exchange was held on November 21st 1894 in the pub “Građanska kasina”. On that day the Belgrade Stock Exchange was founded, when management and stock exchange intermediaries were also elected.

Opening ceremony and the consecration of the Belgrade Stock Exchange was done on January 1st 1895, by the speech of the first president Dimitrije Stamenković, a prominent merchant and the President of the Serbian Trade Association, who delivered a following speech: “Gentlemen, we really have to be proud of the fact that we are founders of an institution such as the stock exchange, which is the first and only one in the history of Serbia. We must be proud even more, as the creation of such institution shows that we are following the path, cultural and economic, that other more educated people already follow a long time ... ” He then pointed out that the credit for opening the Belgrade Stock Exchange belongs to Belgrade traders, gathered around the Serbian Trade Association, which were inspired by the belief that "the expression of power of a state is in a welfare of its sitizens, which again consists of well-regulated trade and advanced national economy without which a country neither could progress nor be strong."

Regular conduct of the Belgrade Stock Exchange began on 3rd January 1895, and on the first meeting the following had been sold:

• 200 napoleons at 23.50 dinars
• 100 napoleons at 23.48 dinars
• 1,800 marks per 144,20 dinars (Berlin)
• 20,000 francs per 117,32 dinars (Paris)
• 5,000 forints per 237.95 (Vienna)
• 4,000 forints per 237.86 (Pest)

In order to achieve that the prices of agricultural products are determined on a domestic market by confronting supply and demand, and avoid prices determined by Pest traders, Belgrade Stock Exchange attempted to develop a commodity exchange. The first meetings were held in Bosnia Pub on the banks of the Sava River, where exporters met and concluded contracts on food and prunes. At first, the stock exchange held only one trading session, with all stock exchange transactions concluded in one sector (currency, effects and goods). Soon operataions were separated, where the Department for Goods was left on the bank of the Sava, as the Commodity Exchange, while the Department of Currencies and Effects, as the Currency Exchange, was located in the premises of the hotel Serbian Crown in Kalemegdan, at 56 Knez Mihailova Street, later on the fifth floor of the house on the address 50 Knez Mihailova Street. There the Stock Exchange remained until the war in 1914. In this period, the Belgrade Stock Exchange was considered the best organized economic institution. It was one of the oldest stock exchanges in Europe with prices considered as the benchmark prices for other European markets, as well.

However, at the beginning business with goods was not giving satisfying results, so the Commodity Exchange closed in 1896, but resumed again to in 1897. On the other hand, opponents of the currency and foreign exchange market, managed to obtain the enactment of Law by which the exchange operations that were performed on the Stock Exchange are taxed sharper than those that were made outside of the Exchange. In addition, a variety of taxes on stock market contracts were introduced, causing this market to cease operations for a while. After extensive negotiations and vigorous efforts of the Stock Exchange management, this practice was suspended, and the Stock Exchange resumed its regular functioning. Interest of traders and bankers to trade in currency and effects was great, so primarily thanks to the revenues from this operations Belgrade Stock Exchange managed to achieve and mentain a relatively lively and dynamic development.