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

little evidence for derivatives trading in Venice other than the discounting of the paghe, the
lender’s claim on interest payments, which occurred in the mid-fifteenth century. 56
If forwards, futures, and options failed to materialize in the Venetian Republic, the
most likely explanation lies in the insufficient volume of the market for bonds. This was
caused by the accumulation of prestiti in the hands of civic and religious institutions,
foreigners, and other long-term investors, in combination with the state’s renunciation of new
bonds issues after 1450. 57 The lack of a voluminous secondary market also prevented Dutch
government bonds to become a vehicle for speculation before the late seventeenth century. As
early as 1570 various cities in Holland and Brabant had begun to issue obligations to bearer. 58
Indeed, by 1650 these bonds constituted no less than 60% of public debt in the Dutch
Republic. However, the bulk of the obligations remained in the hands of the political elite,
trustees of estates, institutions of civil welfare, and other investors buying to hold and not to
trade. 59 In the absence of suitable paper from the public sector, it was left to the private
market to create an asset sufficiently liquid to set of the world’s first derivatives market.
In the last decade of the 16 th century, Amsterdam commerce entered a new phase with
the launch of pioneering voyages to Asia, organized by various companies of Amsterdam
merchants. 60 The merger between these companies into the VOC in 1602 resulted in the
creation of a joint-stock company with transferable shares. The transferability of shares,
designed merely to allow participants to liquidate their investment at any given time, induced
speculative trading from the very day the subscription register was closed. The fabulous
returns of the first pioneering ventures, combined with the provision that payment of shares
could be spread over four years, led many merchants to subscribe in the anticipation of
revenues from earlier companies whose ships had not yet returned to Amsterdam. Other
merchants speculated on price rises that would follow future gains of the new company.
[add figure 1: Monthly transfers of shares of the Amsterdam Chamber of the VOC, calculated
as a percentage of the total stock of capital, 1603-1612 (with six months’ moving average)]
The brisk trade in VOC stock from March 1603 onwards is clear from the share transfers laid
down in the ledgers of the Amsterdam Chamber (Figure 1). In the first five years of the
company’s existence already a third of the capital subscribed in Amsterdam changed hands.
Regular forward trade began once investors had paid up their shares in full. The prices in 33
notarial contracts for the future delivery of shares, concluded in the first nine months of 1607,
reveal the divergent expectations of traders (Figure 2). Forward trading further increased in
8