Backstory: The unofficial Calcutta market, which had thrice the volumes of the main stock exchange – CNBCTV18

The Calcutta Stock Exchange may be waging a grim battle for survival today but less than a 100 years ago, the city had an abundance of trading opportunities with three rival exchanges competing for the investor’s money.

The biggest of them was the Calcutta Stock Exchange, with scrips of some 620 companies being traded. Then there was the Bengal Share and Stock Exchange which provided a forward as well as a cash market and finally the Stock Exchange Association of Bengal.

But all three were overshadowed by a notorious street market dubbed katni, which worked just outside the main exchange at 7, Lyons Range in Dalhousie Square (now renamed B.B.D. Bagh). Despite the unit of trading being set at a 1000 shares (against the 100 at the other exchanges) the volumes on the katni exchange were way higher.

In a sense, it was a virtual exchange since the shares traded were neither delivered nor paid for. All dealings closed at the end of trading day with cash payments of the difference in prices. At this time, 14 days was the normal settlement period on the other exchanges, with postponements driven by broker cliques quite common.

In his 1948 report titled The Regulation of the Stock Market in India (the principal source for this piece), PJ Thomas, the then economic advisor to the finance ministry, called katni “practically, a gambling market” and “a serious menace to the Calcutta Stock Exchanges” many of whose members, ironically enough, traded quite happily on the katni exchange.

This unorganized market, quite similar to the grey markets of Bombay and Ahmedabad as well as the curb market of New York, grew exponentially during the second world war.

Open from morning to late evening at a time when the venerable CSE next door traded only between noon and 2 pm every day, the market was alive with rambunctious traders using the familiar hand signals to initiate trades.

Trading though took place mostly in a handful of stocks, Indian Iron & Steel Co. being the most prominent of them. At this time, the major industries in the region were jute, tea and coal so presumably shares in companies that traded in these were the most common.

A katni exchange was in place for jute trading as well during the 1940s. Reference to it comes in a 1983 PhD. thesis by Dipesh Chakrabarty titled “The Working Class in a pre-capitalist culture: A study of the Jute Workers of Calcutta 1890-1940,” where he writes about gudri and katni as being two other, less formal, exchanges for trading in jute.

While the etymology of katni isn’t clear it is possibly a derivation of the bengali word katani which loosely translates to cutting. Perhaps it was used to indicate an exchange that bypassed the main trading vehicle.