Column: As it Happens

Rossladn and the Stock Exchanges

Ron Shearer

rshearer@mail.ubc.ca

One of the stories that I have been told several times is that trading in Rossland mining shares was responsible for theestablishment of the Toronto Stock Exchange. Of course, that is a myth. The Toronto Stock Exchange long predated miningat Rossland and only two or three major Rossland mining companies were ever listed on it. Yet, Rossland mines did have animportant effect on institutions for trading stocks in Toronto. What is the true story?

Scores of mining companies were incorporated in the mid- to late-1890s for the purpose of developing mining propertiesin the Rossland area and most sought to sell shares to the public to finance their ventures. In 1897 there were over 40stock brokers in Rossland. For them, the question of the day was: should they establish a stock exchange to facilitatetransactions among themselves and to provide market-based quotations of the prices of shares?

The brokers were divided on the issue. Some, whose business was “pure” brokerage bringing buyers and sellers togetherfor a fee gave strongly principled support, arguing that sharp practices in selling shares (charging higher prices toeastern buyers if they could get away with it) were deceitful and the reaction to the practice was spoiling the market forRossland shares. Others, who were typically brokers in name but promoters of particular companies in practice, werevehemently opposed. They argued that mining companies could do better raising money by continuing their existingpractices without the restraint of well-publicized stock exchange quotations of share prices. Nonetheless, in March 1897, itwas unanimously agreed to open a stock exchange in Rossland. What brought the opponents around was the establishmentin January of a stock exchange in Spokane for trading in Rossland mining shares. The Rossland brokers were afraid of adevastating loss of business to Spokane brokers.

The Rossland stock exchange opened on the eve of April Fools’ Day, 1897, with 46 members and over 150 shares listed (asit turned out, perhaps they should have waited a day). In Spokane, the same arguments among brokers were underminingthe fledgling stock exchange there and, hearing rumours that the Spokane exchange was about to close, the dissidents inRossland struck. At a tumultuous meeting on May 17, a month and a half after the exchange opened, they succeeded inpassing a motion to dissolve the exchange and distribute its assets among its members. A delegation went to Spokane toencourage the dissolution of the Spokane exchange, but failed in its mission. For the brokers, it was the worst possibleoutcome. The Rossland exchange closed; the Spokane exchange survived.

This, however, was not the end of the troubles for the Rossland stock brokers. Attracting eastern capital was the key tomining development and both Rossland and Toronto brokers were actively cultivating the Toronto market for Rosslandshares. Because the shares were not listed on an exchange in Toronto or Rossland, the Toronto Globe would not publishquotations for Rossland stocks. The editor’s objection was that the only quotations available were from brokers that oftenvaried substantially, and the brokers were not always disinterested. Some had ties to the companies whose stocks they werepromoting. In response to the disorder in the market, in mid-January 1898, a group of brokers organized the TorontoMining and Industrial Exchange for trading in mining stocks, particularly those of Rossland mines. Membership in thisexchange was restricted so some excluded brokers organized a second exchange, the Standard Stock and Mining Exchange,again primarily for trading in Rossland mining shares. With competition eroding profits, the two exchanges soon merged(June 1900) under the Standard name. The Standard Exchange was absorbed by the Toronto Stock Exchange in 1934, butthis was long after there were any Rossland mining shares in the market. A mining stock exchange was also organized inMontreal in 1899 and Rossland shares were listed there, but they did not have the dominant presence that they had inToronto.

Meanwhile, in Rossland an attempt was made to reopen the stock exchange soon after its closure, but the attempt failed. Abroker then tried to operate a stock exchange privately, but amid controversy soon withdrew. The brokers finally organizedanother exchange in April 1899, but the eastern exchanges rendered it irrelevant. It operated in a desultory fashion for afew years, but by 1904 it was also history.

The Rossland mines were not responsible for the establishment of the Toronto Stock Exchange, but they were responsiblefor the establishment of specialized mining exchanges in Rossland, Spokane and Toronto (two), and had a role in theestablishment of another in Montreal. The myth about Rossland mines and the Toronto Stock Exchange is probably anunderstandable confusion of the Toronto Mining Exchange with the Toronto Stock Exchange.