Amsterdam as the cradle of modern futures and options trading ...

have been keen to impose restrictions on forward trading to counter price rises of staple foods,
or to protect small investors. 13 On the other hand, for forward contracts to become futures,
they need to be cut loose from the original contracting parties and transformed into a
standardized unit. This requires the underlying goods to be fungible, that is in ample supply
and of a standard quality allowing the substitution of one lot for any other one. Moreover, the
contracts themselves must be standardized and underpinned by clear procedures to wind up
transactions and to deal with disputes.
It is very useful, but not strictly necessary, for such procedures to include regular
clearing arrangements and coverage of counter-party risk. Clearing, or rescontre as it was
called in the seventeenth century, is the periodical settlement of mutual claims. Clearing
creates concentrated liquidity. 14 Canceling out the claims against each other allows the
settlement of transactions with payments worth but a fraction of their total portfolio. Clearing
institutions may also provide cover for losses emanating from defaulting market participants.
Both elements make the market more efficient, clearing by lowering the cost of settlement,
counter-party cover by reducing the risk of defaults creating a chain reaction. 15
2. Antwerp and Amsterdam
Even if stock trading figured most prominently in Penso de la Vega’s Confusion de
confusions, derivatives first appeared in commodity trade. Indeed, forward trading in bulk
commodities such as grain, salt, wool, and herring appeared already in ancient and medieval
times. 16 However, before the middle of the sixteenth century, these transactions only involved
merchants and producers trading the season’s expected crop or catch. 17 Even the greatest
medieval fairs, justly famous for the clearing facilities they offered to merchant bankers,
never saw a regular trade in derivatives emerge. Besides the fact that very few commodities of
standard quality were exchanged, the intermittent character of these fairs simply did not allow
the continuous pricing necessary for derivatives trading.
New opportunities for this trade arose when the system of periodical fairs began to
give way to permanent exchange in cities that combined seaborne and overland trade. 18 In the
fifteenth century Venice became a city of perpetual fairs, where “trade and the clearance of
payments were possible throughout the year”. 19 Still, turnover continued to be highest in
midwinter and early summer, when the Venetian fleets sailing to the eastern Mediterranean
and northwestern Europe departed and returned, respectively. 20 A complete shift away from
periodical fairs to permanent markets was first accomplished in Antwerp. Until the late 15 th
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