Competition between financial places: the stock exchanges of Milan and Genoa in the Giolittian period, 1894-1913.

Summary The theoretical literature on financial markets emphasizes that, faced with the increase in competitive pressures determined by the evolution of financial systems, stock exchanges are forced to make major changes in order to defend and even increase their market shares. This phenomenon seems particularly marked in the European Union. Moreover, theoretical research questions the stock market configuration that may emerge from this competition. Consequently, the questions we will answer are: what is the role of competition in the evolution of stock market models? What are their success factors? What factors can explain a strong centralization of financial activity or the coexistence of relatively developed exchanges? We consider this issue from a historical perspective, starting with the study of the Genoa and Milan stock exchanges in the Giolitan era. The Italian case is particularly interesting because it offers an example of radical change in the hierarchy and configuration of the stock exchange system. We show, first, that market models are determined less by competition between exchanges than by competition between categories of operators within each market. Second, we highlight the role of market model heterogeneity in explaining the centralization and fragmentation of financial activity. Finally, the regulatory burdens imposed on participants and the price discovery process play a key role in differentiating markets and explaining the hierarchy between exchanges.