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1874 – The Montréal Stock Exchange: Canada’s First Stock Exchange

The genesis of the first Canadian stock exchange dates back to 1832, when shares of Canada’s railroad were traded informally by a small group of brokers in a Montréal coffee house. In 1874, after more than 40 years of informal trading, the Montréal Stock Exchange (MSE) received a charter from the Quebec government. The MSE would serve as Canada’s largest exchange until well after World War I.

In the two centuries before World War I, Canada’s colonial and then national businesses and governments borrowed primarily from the London capital market to undertake major investment projects. Stocks of major corporations, such as the Hudson’s Bay Company, the Grand Trunk Railway, and the Bank of British North America, were largely held in Great Britain. With the passage of time, however, the number of financial brokers, as well as their activities, began to grow in Canada.

In 1849, the first brokers’ association was established in Montréal. In 1863, the Board of Brokers was formed to supervise share trading more formally. In 1872, the board changed its name to the Montréal Stock Exchange (MSE), which remained the official name until 1982, when it was renamed the Montréal Exchange (ME).

Located in the largest city in Canada, the MSE began to grow rapidly by the turn of the century. By 1910, the number of shares traded in the MSE was 2.1 million annually, compared with only 0.9 million in the Toronto Stock Exchange (TSE).

In 1914, with the outbreak of World War I in Europe, Canada’s reliance on the London capital market was fractured. Canada not only sent thousands of troops to Europe but also exported millions of dollars’ worth of goods, including ammunition and wheat. The war-induced production generated tremendous demand for capital and thus accelerated the activities of North American capital markets. T he Canadian government raised billions of dollars by issuing bonds, which it sold both to its own citizens and on the New York market. The capital market, after a mild slowdown in the aftermath of the war, regained momentum. By the late 1920s, demand for Canadian securities had skyrocketed because of rapid growth in the pulp and paper industry.

The MSE responded to this demand. Although by the late 1920s the number of shares traded in the TSE had surpassed that of the MSE, the number of share transactions in the MSE also grew substantially, exceeding 3 million annually. In 1926, the Montréal Curb Market was created to trade speculative and junior stocks—issued by new businesses which tended to be riskier. Once the businesses matured, these stocks were transferred to the MSE.

During the Great Depression of the 1930s, the value of stocks fell substantially. On 24 October, 1929, a record 382,520 shares were sold in the MSE. Gradually, the MSE weathered the effects of the stock market crash of 1929, and continued to grow slowly with just a few sharp declines, such as the one that occurred during the stock market panic of October 1987.

The function of the MSE has evolved steadily since its inception. In 1974, the MSE merged with the Canadian Stock Exchange, which was earlier called the Montréal Curb Market. In 1975, the MSE became the first exchange in Canada to offer derivatives such as options and futures. In 1982, to reflect the growing trade in derivatives, the MSE was officially renamed the Montréal Exchange (ME).

Links

Montréal Stock Exchange Homepage
Source: Montréal Exchange
http://www.me.org

TSX Group History at a Glance
Source: Toronto Stock Exchange
http://www.tse.com/en/pdf/TSXHistory.pdf

Canada’s Securities Industry
Source: Finance Canada
http://www.fin.gc.ca/toce/2002/cansec_e.html

Historical Highlights of Montréal Stock Exchange
Source: Montréal Exchange
http://www.m-x.ca/mx_hist_en.php

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