Russian Wall Street

In the last few years, a record number of private investors have registered on the Russian stock market. Almost everyone has the opportunity to trade securities and stocks, it is affordable and simple. But until very recently, even in the 2000s, things were much more complicated. No hi-tech brokerage services, remote identification and online registration services, no social networks for traders.

Let’s take a short break and see what historical stages and technological breakthroughs the Russian stock market went through before it became what we see it today.

Trader meetings and trade fairs can be considered the ancestors of modern stock exchanges in Russia. The first stage in the development of the stock market, already in the modern sense, officially in 1703, when Peter I. Petersburg with its decree on the opening of the Petrograd Stock Exchange. It will soon become one of the largest stock exchanges in the world. Until 1789 St. Petersburg stock exchange was the only one in the country, but later trading floors were opened in many large cities (Arkhangelsk, Moscow, Rybinsk, Kharkov, etc.). Our exchanges were commodity exchanges and had their own specialization: railways, bread, coal, iron, etc. Exchange participants entered into export and import wholesale transactions.

It was only in 1810 that they began to practice, for the first time, the issuance of domestic loans in banknotes, and a market for government bonds emerged. By the way, it was impossible to trade foreign securities in the Russian Empire – investors invested only in domestic stocks, bonds and funds. This decision was canceled only at the end of the 19th century.

A great leap forward in the development of the investment market, II. It was achieved by the economic reforms of Alexander, as a result of which the process of creating joint-stock companies began. These joint stock companies brought securities to the market.

At that time, a significant part of the economy was occupied by foreign capital. Investments from foreign investors encouraged the already active stock market hype. Starting in 1886, dozens of industrial enterprises were opened annually with foreign money: the French and Belgians invested in metallurgical and metalworking plants, the Germans – in the mining and chemical industries, the British – in the extraction and processing of oil.

The natural course of development of the Russian stock market was interrupted in 1917, after the Bolsheviks made a series of decisions: the transfer of stock exchanges to branches of the State Bank, the introduction of a ban on trading in securities. This was followed by decisions regarding the gradual closure of exchanges (there were about a hundred across the country), as a result of which Russian and foreign investors lost all their money invested.

During the revolution and civil war, the financial market collapsed.

The revival took place during the NEP period, that is, in 1921, when the Saratov Stock Exchange was opened. By the end of 1926, more than 8 thousand commercial and industrial enterprises and individuals were members of 114 Soviet stock exchanges. However, these exchanges were more of a lever of government control over the economy than a free market. It mainly traded on government agencies and cooperatives.

Like most economic processes in the USSR, the actions on the Soviet stock exchanges were completely controlled by the authorities, and the authorities tried to prevent the stock market game: the terms of the transaction were “in sight”, the stock prices were set by special committees (it was impossible to sell at a lower price), the exchanges were also impossible.

From 1926, messages about the economic inconvenience of the existence of stock exchanges began to appear more and more often on the information agenda, the authorities limited their work, then reduced the number from 100 to 14 and closed it completely in 1930. destroying market relations.

This was followed by six decades of Soviet rule and a planned economy, where the stock market, one of the most important components of the market, had no place.

The revival of the stock markets was provoked by perestroika. In 1992, privatization began, open joint stock companies and securities appeared. By the end of 1992, there were already 22 exchanges in Russia, and in 1995 there were 60 of them – this is 40% of the number of exchanges in the world at that time.

Later, transactions were made either by telephone or directly on the stock market, which is like a market. Everything was very laborious and lengthy: estimating the trading volume was unrealistic, prices were learned from the bulletins of news agencies, the legal registration of trading took a lot of time.

The technical breakthrough took place in 1995, when the Russian trading system was created. RTS meant live trading when a trader called another trader and agreed to the terms of the transaction together. The system allowed bidders to see each other’s live bids. Their transactions are noted in the trading system, and participants can observe the dynamics of prices and volumes and calculate the capitalization of companies.

At that time, the bonds of a foreign currency loan were already traded, you can buy registered short-term government bonds. These are the same classic paper bonds with tear-off coupons.

Knowledge and technical innovations have also changed the nature of the international investment market. With the onset of economic reforms in the 1990s, our country began to actively attract foreign capital again. The main sector (40%) in which foreigners invested was and continues to be industry such as fuel oil, oil and trade.

In the last 10-15 years, the development of information technology and the increase in financial literacy have caused a boom in the Russian private investment market. But still, the share of securities traders in the total number of residents in our country is very small – only 2% of the population (55% in the USA for comparison. Just 2% or 3.5 million people.

The share of private investors in the stock trading volume is 73%, while the remaining 27% are businesses and institutions. By the way, there are 4.15 million enterprises and organizations in the Russian economy, of which only an insignificant part is auctioned.

Private investors can significantly influence the market situation. And the reserves for the growth of the Russian stock market are huge.

The author expresses his personal opinion, which may not coincide with the editors’ position.