Modern-day trading on the Prague Stock Exchange began in 1993, but if you search on the Internet, youâll find almost no details about the first 10 years of its history. Over 1700 companies were originally listed on the Prague Stock Exchange. From my perspective (I invested quite heavily in Czech companies during the first three years), the Prague Stock Exchange was a paradise at that time. GOOD QUALITIES â¢ The nominal value for one share of a company was 1000 Czech crowns. One share truly represented 1000 Czech crowns of the companyâs value. (By contrast, the âpar valueâ of a share for a typical company listed on an American market, for example, is $0.01) â¢ If too many people wanted to buy shares of a Czech company on a trading day, then 1. No shares were traded for the company that day 2. The share price went up 5% If too many people wanted to sell shares of a Czech company on a trading day, then 1. No shares were traded for the company that day 2. The share price went down 5% This approach gave stability to the Prague Stock Exchange. Moreover, it added a limited amount of predictability to the course of a companyâs share price. HIGHLY IMPORTANTâthis approach prevented price manipulation to a large extent. â¢ Most companies had less than 1 million outstanding shares. (To put that number into perspective, by owning less than 10,000 shares, you could have more than 1% of almost any Czech company. As an extreme example, I have more than 1% of a Czech company by owning only 717 shares!) NEGATIVE QUALITIES â¢ The architects of the Prague Stock Exchange made one deadly mistake. Specifically, they set the starting share price for each company at 1000 Czech crowns. Thus, for most companies, from Day 1, the share price had no place to go but DOWN. Czech citizens, who had zero experience with equities after 40+ years of Communism, panicked. They lined up outside fly-by-night âofficesâ to dump their shares at below market prices. They became very distrustful of Czech companies and the Prague Stock Exchange. If the architects had been a little more intelligent, they would have set the starting share price for each company at 0 (zero) Czech crowns, and completely opposite reactions would have occurred. â¢ From the beginning in 1993, the Czech Republic actually had TWO stock markets: the Prague Stock Exchange and RM-System. Rumors circulated at the time that the Prague Stock Exchange served professionals and RM-System served normal people. The rumors were lies. Almost no differences existed between the two markets. Anybody could trade on either market, and both markets listed the same companies. Why, then, did two markets exist? Personally, I think that the architects of the Czech equities markets recognized the huge potential for corruption in their society. Therefore, they created a redundancy by having two markets. If a scandal occurred on one market, they could point to the second market and say, âYeh, but this other market is still good.â Today, both markets still exist. Officially, RM-System is described as the place where âoff-exchangeâ trading occurs. Thatâs a lie, too. Off-exchange trading occurs at offices of Stredisko Cennych Papiru (SCP), which is a separate entity from the RM-System market. Recently, a Ukranian friend sold me his shares in two companiesâZbrojovka Brno and Svit Zlin (both companies are âdeadâ, but he needed money, so . . .). We simply went to SCP and completed a form. It was a real âoff-exchangeâ trade, and we had no need for the RM-System market. Why do I consider the existence of two stock markets from the beginning a negative quality? Well, I blame RM-System for initiating changes to its trading rules that eventually destroyed the original paradise of the Prague Stock Exchange. â¢ Vaclav Klaus, then Prime Minister now President, had a deadly combination in his personality: arrogance and naÃ¯vetÃ©. He wanted to rush the start of the Czech equities markets; therefore, the 1700+ companies went public in two waves during 1993-94. No way the government could do a good job of monitoring so many companies. Needless to say, although the two Czech markets never had a macro problem, corruption within the individual companies was widespread. PRAGUE STOCK EXCHANGE â TODAY In one word, the Prague Stock Exchange today is a joke. I have zero money invested in any of the companies that are currently listed (and I donât care if my former âcolleaguesâ run up the Index PX by 400 points tomorrow in an effort to discredit me). This market is not fun. Only 14 companies are listed on the Prague Stock Exchange. Only three of these companies have any semblance of a relationship to a company that originally appeared on the Prague Stock Exchange in 1993-94. The other 11 companies are actually foreign companies that have the Prague Stock Exchange as a secondary market. What happened to the 1700+ companies that were originally listed on the Prague Stock Exchange? 1697+ of those companies have been DELISTED. Most of the 1697+ companies still exist. Many of the 1697+ companies are very profitable. I own shares in several of these companies. Today, in the year 2008, there is still a lot of activity related to the shares of these delisted companies, butâ¦ahhhhâ¦itâs off-camera. The New York Times April 2, 2007, 6:03 pm I quickly learned that, duh, there is no Prague Stock Exchange, not physically anyway. Itâs just a bunch of computer servers sitting in a backroom that match trades all day.