The Rome Stock Exchange and the Evolution of the Roman Financial Market (1821–1870)

Abstract

How was the Rome Stock Exchange organized and developed “in the long nineteenth century”? Who were the underwriters? What were the interests and the real value of the securities? What weight did the “currency crisis” have and what was the size of the Rome stock exchange compared to other Italian stock exchanges?

How was the Rome Stock Exchange organized and developed “in the long nineteenth century”?

Who were the underwriters? What were the interests and the real value of the securities? What weight did the “currency crisis” have and what was the size of the Rome stock exchange compared to other Italian stock exchanges?

Rome and its state, of which it had been the point of reference ever since, with the return of the popes, which began with Martin V, after the so-called period of the “avignant captivity”, a policy of unification of the ecclesiastical territories was carried out (Caravale, Caracciolo, 1978, pp. 26–42). But the changes that occurred from the end of the eighteenth century and the early nineteenth century during the Napoleonic occupation, and in the course of the nineteenth century, as received by the Rome Stock Exchange, in particular by the transition from the capital of Papal State to the capital of the Kingdom of Italy?

4.1 The Period 1821–1847

Although the governing bodies were aware that new issues would cause further financial turmoil, it was necessary to resort to redeemable debt, which was placed partly within the state and partly, through loans granted by major banking houses, on the European markets.¹

Among the loans contracted internally, that from 8 July 1832 (one hundred thousand scudi) between the Reverend Apostolic Chamber and Luigi Boncompagni, Prince of Piombino, deserves attention. The loan was amortized over 12 years (in gold and silver) according to the capability of the Holy See at a rate of 5% tax-free through income from the Campanoli estate pertaining to the Chapter of St. Peter.²

The state also resorted to various international loans, in particular by entering into agreements with the Rothschilds; by 1846, there were seven loans, of which six were provided by the Rothschild house; the loans were contracted to obtain loans abroad.³ The Rothschilds performed 3 functions during the first decades of the nineteenth century: (1) the oldest, the commercial one, on which the house originally based its fortune; (2) banking in the traditional sense, that is, the movement of bills and gold; and (3) the financial function, whereby the house was primarily interested in investments in securities issued by governments and companies.⁴ In November 1831, in response to Austrian pressure, the Rothschild house in the person of James Rothschild, who signed the bond, granted a loan of 3 million Roman scudi to the Papal State.⁵ However, unlike other European states, which could resort to debt as a development tool, the Papal State was virtually strangled by its need to finance increasingly significant current and unproductive expenses, which reduced the funds that could be allocated to investment in infrastructure and other areas.

In particular, with the Motu Proprio of 11 June 1831, a new internal annuity was established for internal debt that could be extinguished in 10 years at a nominal interest of 5%⁶; 1000 bonds equal to 500 thousand scudi were issued at 500 scudi each; they were easily negotiable and further subdivided, like the old Luoghi.⁷

On July 8, 1831, a regulation was promulgated regarding the issue and extinction of the certificates of the new annuity. The consolidated annuity certificates were referred to as folders and divided into ten classes, each comprising a capital of 50,000 scudi, with an income of 2,500 scudi. These classes were further divided into twelve additional classes. The amortization of the securities occurred, as in former times, through extraction. To avoid or at least limit fraud and make the marketability of the securities safer, a coupon was added to each certificate, which recorded for a period of five years the interest instalments to be collected (each quarter postponed). On expiry of the five years, if the bond had not yet been extracted, the Directorate General for Public Debt issued a new coupon, which reported the serial number of the reference certificate with the new interest instalments to be collected (for the remaining five years). At the time of the drawing, the owner had to return the title to the bodies in charge, at which moment the interest stopped accruing. Subsequently, the coupons were destroyed through incineration.

The Depreciation Fund was officially established with art. 246 of the Motu Proprio of 1816 and operated in other regions of Italy, such as the Kingdom of Naples,⁸ with the specific purpose of amortizing the obligations of the old and new consolidated debt. Subsequently, the notification of January 24, 1825, issued by Leo XII, endowed the Cassa with funds, intended exclusively to provide for the progressive extinction of the debt.

The individual assets with which the Cassa was endowed consisted of the estate of Nettuno (later, the estate was alienated in favour of Prince Camillo Borghese for 40 thousand scudi, and the Cecchignola estate was sold to the Torlonia brothers, as established following the issue of the new redeemable of 1831), the Allumiere, the pine forests of Ravenna, the Mesola, S. Felice, Scavolino and the “relapse” of life pensions.⁹

In addition, a group of major creditors of the state assumed administration of the assets; above all, this body had to remain independent.¹⁰ The fund was obliged to provide an annual payment to extinguish the “old consolidated debt” through “the net income of the assets” of the allocated funds and of the “new debt” established with the Motu Proprio of 1831 using the fifty thousand scudi that by law the “regalia de ‘salts and tobaccos” was obliged to pay annually for this purpose.¹¹

In reality, the state, having to face pressing financial needs, violated the independence of this body, which was unable to operate according to its original criteria.

4.1.1 The Securities Market

The legislative provisions recognized the full negotiability of the public securities in circulation, as in former times. The individual transfers were recorded in special registers housed at the Public Debt Directorate. The securities were nominative, but it was determined to make them also bearer.¹² The consolidated public was undoubtedly the main title of the Roman financial market even in this phase of the nineteenth century, as it had been in previous centuries with the monte system. Public debt securities up to 1833, in addition to the Roman consolidation at 5%, included the listing of the Monte di Milano folders, pertaining to the Papal State after the Vienna Convention, both issued in favour of subjects and foreigners residing in the territory of the Church, and until 1834, the non-interest-bearing credit certificates could be extinguished in numerary and for the purchase of “community goods in the provinces of first and second recovers”.¹³ In 1838, the first shares of the Pontifical Insurance Society were listed.¹⁴ Subsequently, towards the end of the 1850s, the Stock Exchange experienced a certain liveliness in the negotiations regarding shares of companies that operated in the service, railway and insurance and banking sectors (the only shares were those issued by the bank of the Papal State).¹⁵

In a dispatch dated 21 December 1821, the Secretariat of State ordered stockbrokers to open a public stock exchange that every merchant was free to access.¹⁶ The economic group reiterated that it was necessary to eliminate any privilege of or dominance by a subgroup within it so as to maintain the Rome Stock Exchange on the same level as those of other European capitals,¹⁷ from Naples, “where the stock exchange is public and bankers and merchants without distinction at the sound of the bell gather in it”, to Livorno, from Genoa to Marseille, to Ancona, not to mention London and Paris, where the exchange is open to “shopkeepers of every nation” without any subjection to local bankers and merchants, as previously mentioned.¹⁸ Starting in 1790, newly admitted participants had to deposit 25,000 scudi at the Sacro Monte di Pietà or the Banco di S. Spirito.¹⁹ Until then, the “bankers” had customarily constituted a closed caste such that only seven or eight private bankers were recognized in Rome,²⁰ who gathered once weekly (usually Friday) at the Archiginnasio della Sapienza with only two “middlemen” (stockbrokers) to fix “the exchange”.²¹ The fixation of the exchange rate between square and square was determined by negotiation and fluctuated relative to the supply and demand of exchange letters while also considering current values at foreign commercial centres.²²

Because the government linked the nominal value of the bonds of the “old” consolidated public debt to these prices, as was customary in the major European markets, while those relating to the 1831 issue continued to be repaid at par, the lists were of particular importance. The Motu Proprio of 11 June 1831 established that even the “old consolidated debt” had to be repaid at par, “that is, at the rate of one hundred scudi in capital over five scudi of annuity, through the extraction to be done annually of as many certificates”.²³ Subsequently, the governing bodies agreed to amortize the old consolidated debt by linking the securities “to the commercial price” because “the repayment at par with the annual extraction method has little effect on public effects, which in the current circumstances have a continuous movement, and because the net product of stable assets destined for amortization is not in proportion to the total of the old consolidated debt to be amortized”.²⁴

4.1.2 The Subscribers

The major capitalists of the state were invited by the government (the securities market had suffered negative repercussions from recent events) to subscribe to the new securities for the “good of public affairs”. The recourse to individual private capitalists and “institutional investors” (to use current terminology), whose assets and income could ensure the placement of the securities, was nearly obligatory. The vicissitudes of the old debt, which, as mentioned, had reduced the repayment expectations of the underwriters (the loss percentages were 75 and 76%), did not allow public and indiscriminate underwriting except at high risk.

Figure 4.1 shows that only 18% of the redeemable bonds (1832–1835) were issued to the bearer, while 46% were subscribed by “institutional investors” (e.g., convents, hospitals, chapters) and 35% by private capitalists. Of the latter, more than half (60%) were issued to the private banker Torlonia and the remainder to a small number of individuals belonging to the Roman nobility (Agostino Rampicci, Vincenzo Grazioli, Angelo Galli, Angelo Polucchio, Pietro Forti, Ugo and Pietro Spinola, Galeppi) or high prelates of the Church (Brignole Apostolic Nuncio of Florence, Archbishop of Bologna, Monsignor Benedetto Costantini).

Fig. 4.1

(Source SAR, Camerale II, Debito Pubblico b.14)

Unit holders of redeemable public debt (1832–1835) (Tot. scudi 196,288)

Meanwhile, the members of the Roman nobility noted above and the private capitalists invested in subscriptions as holders of significant liquidity. Then, strengthened by this position, they were able to place the securities held on the secondary market when the opportunities of that market allowed them to sell at the most convenient quotations.

The knight Alessandro Torlonia, for example, reallocated securities acquired in the subscription of the redeemable debt on the secondary market. The reallocation was facilitated by his position as official banker of the State. One should recall that the role of the banker as an intermediary between the Apostolic Chamber (i.e., the issuer) and the securities market was widespread if not essential in the sixteenth and seventeenth centuries. In the eighteenth century, this figure was overshadowed by the increasing role played by the Monte di Pietà and the Banco di S. Spirito. Under French domination, these two credit institutions were suppressed. However, after a temporary reopening during the first restoration, they became operational again in 1818. Lacking the capital necessary for their effective reactivation, they became easy prey for the new institutions that slowly came to be established.²⁵

4.1.3 The Real Value of the Securities

Consolidation displayed a high degree of elasticity with respect to political institutions. Regarding these constraints, Table 4.1 shows how the stock market trend identifies economic periods with completely dissimilar peculiarities, as marked by the fall in the price at the quarterly maturities of interest. Between 1814 and 1848, the break in the historical series of quarterly average courses of consolidation is represented by the minimum of 1831. As was previously pointed out, 1831 stands as a watershed in papal finances, which, due to the state’s crises, record greater deficits.²⁶ The public debt burden underwent a surge starting in 1831, and between 1831 and 1832, it reached a maximum of 34%, settling at approximately 30% with small fluctuations except for a surge in 1838, when it reached nearly 35%.²⁷

Table 4.1 Quarterly and annual quotations of the Roman consolidated debt at 5%

The inconsistent price trend between 1814 and 1848 is partly explained by the economic and financial policy phases of the restoration period and by the economic and financial emergency measures. The cyclical sweep of the quarterly average prices of the public securities traded on the square in Rome recorded expansionary and recessive phases that coincide precisely with the political, economic and financial events of the State, characterized by medium expansion phases (2–3 years) and short recessive phases (1 year to a maximum of 2 years). From 1821 to 1833, securities relating to the Monte di Milano are also listed (for an annual average of 80–90 scudi up to and exceeding par only for the third quarter of 1830, reaching a maximum quota of 103 scudi)²⁸; previously, it was determined to combine the public debt with the consolidated debt (in 1832), non-interest-bearing debts (which fluctuated between 91 and 95 scudi and then fell after 1831) and community debts until the community debt was completely liquidated.²⁹ Quotes remained fairly stable for the shares of the Cassa di Risparmio (equal to 190 scudi), while the anonymous insurance company reached 166.86 in 1847 (with nominal shares of 107.13 scudi; Fig. 4.2).

Fig. 4.2

(Source Data processing based on Diario di Roma aa.1832–47. For the quotations of Roman bonds on the Paris stock exchange, see Felisini, 1990, p. 107)

Trends in Roman bond prices on the Paris stock exchange, internal Roman consolidation folders (both at 5%) and the insurance company shares

The gradual increase in prices from 1831 onwards probably underpinned the constant interest of the state not only to obtain less burdensome credit conditions in contracts with domestic banker merchants but also to maintain and obtain international credit. This type of conditioning damaged the interests of the subjects of the new enlarged circuit (state—private finance—international finance), which required an increase in prices that would move the internal market and lighten the burden of the conditions of the loans taken out at the prices of the Paris market and at the same time create an impression of a certain economic and financial stability of the state on the European market. The consolidation surpassed par after 1838, reaching its maximum price in the first quarter of 1845: 112 scudi. The price of domestic securities closely resembled that of the bonds listed on the Parisian market (Fig. 4.2).³⁰ This superimposition of the Roman hypercycle on the Parisian hypercycle reflected a certain balance in the internal market and a degree of success in the external market. In 1847, prices underwent a significant decrease from 104 scudi to 100. The republican phase was approaching, and a new pontiff had been selected. However, the share price no longer went below par.

In conclusion, various parties reiterated the need to intervene with new rigor to improve the financial system, but these investment proposals remained for the most part ineffectual and concerned only single sectors of the financial landscape rather than that landscape as a whole, in the sense in which Benedict XIV had tried to proceed.³¹ Among the individual proposals was one to convert the consolidated annuity from 5% to nominal 4% or even less; had it been adopted, it would have represented an important step since it would have allowed the Papal State to adapt to the general trend of other countries while lightening the public burden of interest on public securities.³² It remained an opportune moment to create greater demand for direct consumer goods and decrease the armed and civilian military forces,³³ and the public treasury would have had to make sacrifices to invest in new sectors, such as rail transport, which was gaining ground in the largest European countries.³⁴ Therefore, if at first, thanks to the work of Cardinal Consalvi, a policy of modernization was pursued, profound political dissatisfaction, financial difficulties, the chronic use of budget revenues in unproductive expenditure and the recurrent and systematic recourse to debt to finance the deficit made it difficult for the state to manage and forced it to depend on foreign powers for its survival.

4.2 The Period 1847–1860

To avoid insubordination, denounced in 1846 by the provincial magistrates, and to address an agricultural harvest not expected to be particularly positive, the papal government adopted several customs measures that while aiming to favour the supply of goods to the working classes contributed to a slowdown in commercial traffic in 1847.³⁵

The value of exports decreased from 5,640,000 to 3,642,000 scudi, while imports increased from 2,176,000 to 3,087,000 scudi.³⁶

The greater imports did not translate into profits for the traders, who had responded to speculative pressure by requesting since the summer of 1847 free trade measures³⁷; as it turned out, good harvests disappointed the expectations of the traders and the communities of the Papal State, who had taken steps to build up stocks, which were then left unsold “with very serious damage to the owners and contracting communities”.³⁸ The dynamics of the commercial crisis that afflicted the State of the Church were similar to those afflicting other European countries in 1847. The budget deficit caused by increased cereal imports resulted in a drain of cash abroad and a slowdown in monetary circulation.³⁹ The outflow of capital to service loans contracted in Paris and Genoa increased the negative state trade balance.⁴⁰ One immediate consequence was an increase in requests for deposit reimbursements at the Cassa di Risparmio di Roma. To meet these requests, the Bank withdrew ever more substantial shares of the funds deposited at the issuing institution, depriving this institution of an important metal reserve needed for the exchange of tickets. The economic situation that emerged in the autumn of 1847 was accentuated in the following year.⁴¹ Due to public debt burdens and lower customs revenue, the 1848 deficit budgeted by the treasurer for financial management was more than double that of previous years.⁴²

The budget deficit of November 1847 increased dramatically at the end of March 1848, when preparations to intervene in the war of independence required the public debt burden, the largest component of the papal budget, to be added to the “expenditure for arms”, which doubled, as previously noted, from 1,954,000 to 4,000,000 scudi, among other difficulties. Government intervention in support of the banking institutions (ordinance of 11 April 1848) Banca Romana and Cassa di Risparmio had occurred in the context of financial circumstances such that, having set aside extraordinary finance projects, had no other way to ensure the coverage of expenses except by creating liquidity through printing fiat-backed securities to guarantee they would be held by the public. The decree of April 1848, which marked the first issue of government bonds, was only the beginning of a monetary policy in which subsequent issues of bonds and notes caused an increase in paper inflation. In December, it was necessary to print another three titles at a value of 600,000 scudi to be added to the first 800,000.⁴³ The printing occurred despite the contrary opinion expressed by the representatives of the Chamber of Commerce regarding the danger of the depreciation of paper money and the consequent premium placed on gold.⁴⁴ The financial conduct of the provisional government (from 25 November 1848 to 9 February 1849) and of the republican government (from February 1849 to the following 3 July) did not differ from that of the pontifical authorities. During the Republican period, the number of fiat bonds in circulation increased to 6,890,160 scudi.⁴⁵ To these were added the tickets printed by the Banca Romana for 1,500,000 scudi on the orders of the republican authorities.⁴⁶ The 3.6% yield enjoyed by all government issues up to January, equal to 3,900,000 scudi, was abolished in March 1849, thus assimilating public debt securities to banknotes.⁴⁷

Until 1852–1853, while in the rest of Western Europe and in certain areas of the Italian Peninsula the money supply increased and access to credit was facilitated, in Rome, the continuation of the compulsory course of government notes caused a premium of gold on paper, which reached 17–18%. This phenomenon penalized the profits of the export trade and the resumption of commercial transactions. Shopkeepers complained that “metal species are commonly used today at 5–6%”, while in the years preceding the crisis, the cost of money was below 4.5%.⁴⁸

To restore the convertibility regime and ease tensions on the money market, the papal government ordered in April 1853 that the remaining amount of paper money be withdrawn from circulation within the year and “gradually replaced with actual money”.⁴⁹ The new bond loans, obtained abroad between 1853 and 1854, provided the government with the financial means necessary to undertake from the summer of 1853 to April 1855 the issue of metal money for a total amount of 4,538,280 scudi, which was used in the withdrawal of securities.⁵⁰

The operation conducted by the Treasury, however, did not have the desired outcome because of the effects of the new ration crisis that developed in the Papal State and other Italian and European states, precisely in the two-year period 1853–1854.⁵¹ The serious deficit that occurred in foreign trade in those years, caused by the greater imports of cereals, was such that “the metallic currency issued in place of treasury bonds soon disappeared from circulation, mostly drawn abroad by the force of circumstances, in response to the scarcity of representative or circulating values of any kind”.⁵²

In the autumn of 1854, internal monetary tensions worsened, causing a slowdown in the inflow of deposits from the Savings Bank of Rome. In November 1854, the government authorized the issuing institution to limit the exchange of its notes to 10,000 scudi daily. At the end of the year, a credit balance 30% lower than that of the previous year was recorded. This outcome was attributable to the 59% increase in withdrawals in the second half of the year compared to a 22% decrease in deposits. Reimbursement requests increased sharply, culminating in a rush of depositors for liquidity starting in December 1854 and continuing in 1855. It was necessary to wait until the beginning of 1856 to normalize the situation and to remove all limits on the exchange of tickets.

The development of new forms of collection during this period in competition with the Roman deposit banks helped slow the withdrawal of deposits. This phenomenon explains, for example, the annual balance of the collection of deposits, which remained modest at the Cassa di Risparmio di Roma despite the presence of a larger depositor base.

The articulation of the financial market due to the increased supply of securities, both public and private, favoured investment opportunities that were more profitable than the 4% that the Cassa di Risparmio paid its depositors. The internal placement of several public debt issues facilitated the purchase of 5% annuity bonds, which were also made attractive by stock market prices that remained below par for the entire decade.⁵³ Other investment opportunities were offered by anonymous companies established in Rome in the 1850s.⁵⁴ In this decade, there were 22 anonymous companies, whose total capital amounted to 18,670,000 scudi spread over 218,310 shares. Among such companies, the railway construction sector stood out, which alone accounted for 85% of the total share capital.

The dimensions of the Roman financial market were undoubtedly more modest than those of other Italian cities, such as Genoa, Turin or Milan, where the modernization process in those years was more pronounced.⁵⁵

Due to fragmentary and nonhomogeneous archive sources, it is difficult to assess what effects the new investments had on production levels and on the Roman economy of the 1850s. However, one factor that must be considered is the presence of the names of well-known businessmen and members of the Roman nobility in the founding documents of the companies established in those years. In fact, excluding the railway company and the Anglo-Roman company for gas lighting, which were established primarily with foreign capital, the local financial elite was among the most active promoters of the most important commercial companies in recent years. Its presence was dominant in the insurance sector, where three companies operated, and in the mining sector, where the Roman Society of Iron Mines operated, one of the few companies remaining active in the aftermath of 1870.⁵⁶ The subscribers of these companies include the names Rospigliosi, Borghese, Feoli and Costa, among those other prominent figures.

The decade preceding 1860 is important for understanding the evolution of the Roman stock market, which until then had been based on the quotations of Roman consolidated securities and since 1838 on those of the shares of the Pontifical Insurance Company.

4.2.1 The Stock Trend

Securities prices in this period vary from the second semester of 1849 to 1860.

That the primacy of the Roman consolidation and its trend was closely linked to the political and economic situation of the State was immediately evident when in 1848 share prices collapsed.

The decline of the two-year period 1850–1851 was followed by an expansion phase (approximately three years) and a recessive phase (1 year). In fact, the ration crisis of the two-year period 1853–1854 caused a serious shortage of representative or circulating values of any currency.⁵⁷ In this period, stock prices reached their minimum in 1855. After the critical period, there was an increase until 1859, the year before Unification, during which political tensions were the fundamental cause of a new fall in stock prices.⁵⁸ The considered period witnessed a substantial increase for the Roman market in listed securities due to the investment opportunity they represented for “the aristocracy”.⁵⁹

The redeemable debt certificates for the withdrawal of paper money constituted a valid alternative to the consolidation. The first trace was issued in 1850 and listed in 1853; in 1856, two additional traces appeared, the first with a nominal value of 100 scudi and the next at 50 scudi. While the first series was proposed with a nominal interest rate of 5%, the following series were proposed at 3%.⁶⁰

For the first-issued annuity certificates, the year of greatest decline was 1855. Subsequently, until 1857, when this security was delisted from the stock exchange, the trend settled on values close to par.

The second issue of the certificates exhibited a gradually decreasing trend.

In the insurance sector, the first listed title was that of the Privileged Pontifical Insurance Society. Its value was 500 scudi, of which only 100 had to be paid at the time of subscription. The stock maintained a constant trend until 1854, when its price decreased by 30%. It decreased by half the following year. The course of the quotations subsequently increased again, settling at approximately 80 scudi in 1859, the year the title was delisted. The other two listed insurance companies were the Roman Society of Maritime and River Insurance and the Rome Commercial Company for Maritime Insurance. The first, whose shares had a nominal value of 300 scudi and an effective value of 30 scudi, exhibited strong growth from 1851, the year of the listing, until 1854, the year of the crisis. Its values subsequently decreased, and the stock was delisted in 1857.

The second company, whose capital consisted of shares with a nominal value of 500 scudi and an effective value of 50 scudi, displayed a similar trend. Its value increased starting in 1852, the year of listing, until 1854, when it reached its maximum, whereupon it decreased in subsequent years. In September 1855, its effective value was 2/10 of its face value. The stock remained listed until May 1859.

The Bank of the Papal State, established in 1850, was listed on June 17, 1853. Its shares had a par value of 200 scudi, and the quotation series displays rapid growth in the price of the stock until the first half of 1854. Beginning in the second half of that year, the stock began to decline, reaching its nominal value at the beginning of 1855 and remaining there until the middle of the following year. The monetary tensions that had intensified at the end of 1854 and the consequent decrease in deposits were the fundamental reasons for the fall in price. The expansion phase of the title recommenced in 1856 and lasted until 1859. It was then slowed by the shock of political events, including the loss of legations by the State of the Church and its relative weakening on the international scene. The Roman Society of Iron Mine (Società Romana delle Mine di Ferro), whose shares had a nominal value of 100 scudi, similar to that of other listed securities, reached its lowest listed value in 1855; during the remainder of the period considered, after increasing to approximately 80 scudi, it remained stable; this trend is probably attributable to support measures by the Treasury, which held a good number of shares in this company.⁶¹

The Regia Pontificia dei Sali e Tabacchi, which beginning 1 January 1856 was administered autonomously by the government and no longer subject to a joint administration contract, was constituted with a fund of one million scudi divided into shares of 200 scudi each. Its price trend shows strong growth from March 1856 until the end of 1858, after which it reached its maximum. The following two-year period witnessed a sharp decline in the stock, the explanation for which could be linked to a contraction in the consumption of the goods the firm produced, as indicated by the decrease in indirect tax income from these goods during that period.⁶²

The Anglo-Roman Society for Gas Lighting, established in 1852, was listed in 1857. Its shares, issued at 50 scudi, increased steadily in value for the entire decade under consideration. As noted in other parts of this work, this increase was due to the great importance the service sector was assuming in Rome, whose population was increasing annually.⁶³

This company, created thanks to the contribution of foreign capital, is undoubtedly representative of the increasing significance of the Roman securities market, which nevertheless remained at an embryonic level compared to that of other Italian and European stock exchanges.

In the railway sector, the first company to list shares was the Società delle Strade Ferrate Romane, known as the Pio Centrale Line; its shares were valued at 500 francs, each equivalent to 92.94 scudi (at the usual exchange rate of 5.40 francs per scudo), but the shares were actually issued at only 150 francs.⁶⁴ The shares displayed a constant trend for the entire decade considered and then were delisted. The delisting was inevitable given the financial difficulties of the company, which was damaged by the loss of the Legations of the Roman State and by a decree of the government of Paris that prohibited the listing of securities not fully released on the Paris Stock Exchange.

The so-called liberated shares were those of the same Pio Central Society, which issued securities in a ratio of one new share to two old shares on payment of 100 francs. The newly issued shares valued at 400 francs actually cost 250 francs each. These stocks also exhibited a constant trend throughout the period. Bonds valued at 500 francs but issued at 252.50 francs behaved similarly.

During this time span, another listed company was Pio Ostiense for the Saline d’Ostia. This company’s presence in the listing testifies to the shareholding role played in it by the pontifical government. The company was noted for a moderate increase in the value of its listing.

The price data for Pio-Latina stock were too scarce for a significant trend to be identified; the company experienced ups and downs.

4.3 The Period 1860–1870

For the Italian stock exchanges, the 1860s were a period of profound uncertainty. A certain instability reigned throughout the Italian Peninsula for various reasons. On the one hand, as a corollary of the taxing political and economic fusion of the former autonomous Italian regions, the new Kingdom of Italy had to face difficulties with no immediate solution. On the other, to the Papal State, the approaching opening to the new territory, with a consequent lack of tranquillity and certainty (indispensable conditions for balanced financial and economic development) was increasingly evident. These factors could not fail to be reflected in “the mirror” of a country’s economy: “On the other hand, the stock exchange is a device that measures and regulates the economic forces of a country and there is no fact or event that, directly or indirectly, is connected with the production, exchange or consumption of goods, or that directly or indirectly affects the conditions of private or public credit, which does not have an impact on the stock exchange”.⁶⁵

In the decade under consideration, the Rome Stock Exchange had a single main set of regulations, which replaced the previous one of 1854: the Regulation issued by Pope Pius IX on 23 July 1862.⁶⁶

It should be noted that as in all other stock exchange regulations forward contracts were not considered⁶⁷; it is possible, however, that even if not legally recognized such contracts had their own illicit market.⁶⁸ As previously mentioned, in 1866, the figure of the moneychanger was formally introduced although initially moneychanging was not directly connected to stock exchange activity.⁶⁹

The work of the moneychangers, however, also extended to other environments, as the interested parties themselves did not respect their limitations, invading both the sphere of stock exchange and banking activities, as evidenced by a currency exchange established by the Chamber of Commerce.⁷⁰

Following the monetary reform of 1866 and the consequent replacement of the Roman scudo by the Italian lira, the stock exchange deputy, at the end of the same year, announced it was obligatory to operate using the new currency.⁷¹

The stock exchange listing represented an indispensable tool for the official securities market. It was the only secure source of information available regarding quotes, that is, the prices fixed by the confluence of demand (for money) and supply (of securities credit, shares and currency). “The point at which the buyer and seller meet forms the level of the exchange rate. Therefore, the price list does not fix but indicates this meeting point between the seller and the buyer, as the stone indicates the more or less high level of the course of the waters”.⁷² In this regard, Da Pozzo and Felloni write, “as is well known, stock market fluctuations are attributable to extremely numerous and variable factors, which can be roughly classified into two large groups: 1. intrinsic or particular factors, which concern exclusively the issuing company of the security and which directly affect its economic solidity, its income capacity and the volume of the free float; for government bonds (and those of public bodies in general), the situation of public finances, the prospects for repayment of capital and for the payment of interest, etc. can be considered as such. Extrinsic or general factors affect the entire stock market and are connected with investment opportunities, with the availability and orientation of capital, with the monetary situation, etc. In reality, the intrinsic factors indirectly affect the entire stock market; any alteration in the profitability of a security modifies the pre-existing equilibrium, tending towards the equality of the average incomes envisaged for the various securities investments, and through speculation sets in motion a phenomenon of revision to restore the equilibrium, of course at different levels of profitability and therefore of quotations”.⁷³

As in much of past stock exchange history, the 1860s were accompanied by repeated rebellions and conflicts, which mainly occurred between two opponents; on the one hand, there were the brokers and stockbrokers, who demanded from the public authorities a more energetic fight against illegal activity within the profession⁷⁴; on the other hand, there was the Chamber of Commerce, which blamed the middle class for the continuing shortcomings in transaction declarations and therefore the consequent lack of full validity of the stock exchange lists. After numerous appeals, the speaker of the chamber turned to the minister of the interior, asking for greater speed and incisiveness in punitive procedures.⁷⁵ A letter from the Minister of Commerce, dated 1869, announced the name and number of the brokers operating in the Roman square, trying in this way to neutralize interlopers and protect those who used the brokers.⁷⁶ In July 1869, in Rome, there were forty-eight “primary” and twenty-nine “secondary” brokers (at least officially; that is, in possession of the necessary operating licence), of which eleven were involved in wine and oil goods.

In 1870, the life of the Rome Stock Exchange did not conclude with the same epilogue as the Papal State. After that famous 20 September the trading of goods and securities continued under the authority of the new Italian government. The description of the Rome Stock Exchange that appeared on 29 January, 1871, in “L’Italia Economica”, the Italian business newspaper, is highly instructive⁷⁷; in it, one peculiarity of the Rome Stock Exchange emerges. In terms of importance, the Roman square, while ranking among the top Italian stock exchanges, never represented the top of the stock market pyramid. If in the nineteenth century it had to “submit” to the superiority and greater fame of the Genoa stock exchange, in the twentieth century, it will be dominated by that of Milan.

As they do today, stock market prices reacted negatively to political and military events that create instability and uncertainty. It is precisely these two elements, instability and uncertainty, that repeatedly hindered Roman investors during the transition from the Papal State to the Kingdom of Italy. How could one expect that after the reduction of the Papal State to Lazio alone or after major military battles or after the financial crisis of 1866 investors could be found willing to forgo safer uses of their money, such as investing it in land, to try a stock market adventure? With the end of the Papal State imminent, how could one hope to find holders of capital willing to purchase share packages in companies with little idea of what was in store for them in the new Italian context? To all this, we must also add the strong aversion to risk-taking of the few Roman capitalists. Often, the largest financial transactions of the decade were made by foreign investors who managed to find opportunities for profit in the Roman environment. An example was the Belgian De Merode, who was able to foster a wave of entrepreneurial and business ideas that encouraged the entry of economic and financial forces. These forces began to change certain features of the economic and urban face of Papal Rome as it neared its end.

It should also be remembered that the only company listed on the Rome Stock Exchange whose shares rose at the end of the decade was the Anglo-Roman Company (Table 4.6), which was funded primarily by English capital.

Already in this nineteenth-century stock exchange we can note a peculiarity that has persisted to the present: the formal freedom of access to stock market trading was only apparent. In essence, the stock exchange became an oligopolistic, closed and reserved market, as Weber states:

On a formal level, stock exchange trading can also be accessible to anyone, without any distinction, but the fact is that the private sector is excluded from it by a natural barrier, which prevents it from operating independently and successfully. What he [the investor] lacks, in fact, is a knowledge of the market that is acquired only with the profession, and which, in any case, for those who possess it, is in fact also the basis of their position of privilege. On the other hand, this means that only those who possess (or of whom it is known, in some way) a sufficient amount of credit can participate in the trade. Those who do not know the market or are not known to it (due to the fact of not operating permanently) must instead turn to professional merchants with strong capital and become their customers. A formal freedom of access does not serve to modify, but only to hide, this situation which is both real and necessary at the same time.⁷⁸

Therefore, at this juncture, the Rome Stock Exchange, perhaps because it still belonged to a state other than the Italian one, presented rather rare characteristics. It could be said that it enjoyed a unique character compared to the other stock exchanges of the peninsula. The low number of economic subjects present, the simple and formal rules due to good faith in bargaining, and the absence of public security officials can be highlighted. The Roman business centre was comparable to “… a family reunion to sincerely conclude a deal”.⁷⁹

However, the already porous borders of the late 1860s were demolished on that famous 20 September, starting a process of homogenization and “globalization” of the Rome Stock Exchange and of the other Italian stock exchanges.

4.3.1 Stock Exchange Lists: 1860–1870

The following tables present the stock exchange lists from 1860 to 1870; they are adopted from the main daily newspaper of the time, the “Giornale di Roma”,⁸⁰ which recounted the main events in politics, economics and other areas that occurred in the Papal State.

Securities quotations⁸¹ were published weekly, but for a better summary analysis, in this study, it was preferred to summarize them through half-yearly arithmetical averages to better reveal their trend.

The lists with the prices of securities, exchanges and currencies had a rather simple and essential form: they were limited to indicating the name of each item and the corresponding price.

During the considered decade, the number of listed securities did not vary much. The public securities quotations also included the prices of the Roman Consolidation and Treasury Certificates (Tables 4.2 and 4.3). In fact, six private companies were listed, one for each of the following economic components: salt and tobacco (Table 4.4), the bank of the pontifical state (Table 4.5), ironworking (Table 4.6), lighting (Table 4.7), railways (Table 4.8) and land reclamation (Table 4.9).

Table 4.2 Consolidato Romano: 5% interest

Table 4.3 Treasury certificates: scudi 100 al 3%

Table 4.4 Pontifical direction of salts and tobacco: shares: 200 scudi, 5% interest

Table 4.5 Bank of the pontifical state: shares: 200 scudi

Table 4.6 Roman iron mining company: shares: 100 scudi, 5% interest

Table 4.7 Anglo-Roman company for gas lighting: shares: 50 scudi

Table 4.8 Roman railway roads Pio Centrale Line: shares scudi 92.94 as franchi 500, interest fr. 25 all’anno

Table 4.9 Pio Ostiense Company for the salt pans and remediation of the Ostia pond: shares franchi 500, sc. 92, 59

It should be noted that throughout the decade certain companies did not submit quotations but nevertheless continued to maintain their names on the stock exchange (e.g., the Privileged Pio latin Company that owned the railway line from Rome to Frascati; the Debt line from Rome to the Neapolitan border; the Maritime and fluviali commercial company of Rome).

It should also be noted that after the introduction of the Italian lira in 1866, the values were no longer expressed in Roman scudi. However, to facilitate comparison over the years, it was determined to convert the securities prices into the old accounting unit: the Roman scudo (Table 4.10).

Table 4.10 Fluctuation in securities prices over the decade 1860–1870