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The World's First Stock Exchange

The World's First Stock Exchange

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  • Book Info
    The World's First Stock Exchange
    Book Description:

    The launch of the Dutch East India Company in 1602 initiated Amsterdam's transformation from a regional market town into a dominant financial center. The Company introduced easily transferable shares, and within days buyers had begun to trade them. Soon the public was engaging in a variety of complex transactions, including forwards, futures, options, and bear raids, and by 1680, the techniques deployed in the Amsterdam market were as sophisticated as any we practice today.

    Lodewijk Petram's eye-opening history demystifies financial instruments by linking today's products to yesterday's innovations, tying the market's operation to the behavior of individuals and the workings of the world around them. Traveling back to seventeenth-century Amsterdam, Petram visits the harbor and other places where merchants met to strike deals. He bears witness to the goings-on at a notary's office and sits in on the consequential proceedings of a courtroom. He describes in detail the main players, investors, shady characters, speculators, and domestic servants and other ordinary folk, who all played a role in the development of the market and its crises. His history clarifies concerns that investors still struggle with today, such as fraud, the value of information, trust and the place of honor, managing diverging expectations, and balancing risk, and does so in a way that is vivid, relatable, and critical to understanding our contemporary financial predicament.

    eISBN: 978-0-231-53732-2
    Subjects: Finance, Economics, History

Table of Contents

  1. Front Matter
    (pp. I-IV)
  2. Table of Contents
    (pp. V-VIII)
  3. 1 A World-Famous Book
    (pp. 1-6)

    This is not about Wall Street and the area around it, nor is it about the City of London. This is Amsterdam, the Amsterdam of around 1688—more than three centuries ago. It was not long since the great town houses along the rings of canals had been finished, and at night, save for a few flickering lanterns outside the houses, it was pitch dark in the streets and on the canals. On the far bank of the bay known as the IJ—clearly visible from the city—the bodies of condemned felons swung from the gallows. Was this really...

  4. 2 A New Company
    (pp. 7-34)

    At just before ten in the evening of Saturday, August 31, 1602, the notary Jan Fransz Bruyningh closed the door of his house on Heintje Hoekssteeg behind him. He walked along the narrow alley toward Warmoesstraat and turned left. A few minutes’ walk brought him to his destination, the house of the merchant Dirck van Os on Nes, where two men were waiting for him. Jacques de Pourcq and Anthony van Breen would be assisting him as witnesses.

    Dirck van Os was one of the directors of the Dutch East India Company (Vereenigde Oost-Indische Compagnie, or VOC), which had been...

  5. 3 Early Share Trading
    (pp. 35-50)

    Antoine l’empereur had been fascinated by the trade with the Far East since the time of the first precompanies, and his interest became professional once he started to deal in silk. He tried to keep a close eye on the East India Company’s activities, but there was a problem: L’Empereur lived in Leiden, a town without a Company chamber. Amsterdam is not that far from Leiden, but a quick trip there and back was not easy in the early seventeenth century. Fortunately he had a nephew who lived in Amsterdam, Jacques de Velaer Jr., who was often at New Bridge,...

  6. 4 Angry Shareholders
    (pp. 51-76)

    In 1613, Isaac le Maire was living in Egmond aan den Hoef. One of the founders of the VOC, he was also the biggest investor in the Amsterdam chamber, with a subscription nominally valued at 85,000 guilders. He had not relocated to Egmond aan den Hoef to get some peace and quiet or to enjoy being near the sea. He had left Amsterdam because things had gotten too hot for him there. Embroiled in a protracted lawsuit with the directors of the Amsterdam chamber—his former colleagues—le Maire could do nothing with his Company shares until the lawsuit was...

  7. 5 Fraud
    (pp. 77-99)

    Barent lampe did not have a bad job. As the Amsterdam chamber’s bookkeeper since the Dutch East India Company’s foundation in 1602, he kept all the chamber’s income and expenditure up to date and received a fixed salary from the directors in return. He was also responsible for registering share transfers—the capital accounting. It was not a full-time position. Some days, only five shares changed hands. Now and again only two pairs of dealers showed up, and there were occasions when no one appeared. Lampe was paid a small amount of commission on every transaction, so transferring shares was...

  8. 6 The First Boom
    (pp. 100-121)

    Thomas sprenckhuysen had held on to his share in the Dutch East India Company for almost thirty-three years—since the Company’s foundation, when he subscribed to the initial capital through the minister of his Remonstrant church, up until March 1635. Sprenckhuysen had decided it was time to sell his share. He had heard that the price had risen more than 37 percent over the previous two years, from around 175 to about 240, so this seemed like a good moment to sell. If he could dispose of his 300-guilder share at 240, he would have made a handsome return. While...

  9. 7 Jewish Traders
    (pp. 122-142)

    It was still very early in the morning of January 1, 1672, when the notary Adriaen Lock and two witnesses walked toward the wooden bridge over the Amstel that led to the district where many Jews lived. In his pocket the notary had a writ that he had to read out to Joseph Pereira.

    Pereira’s home was soon found, and Lock knocked on the door. Pereira opened the door himself, so Lock could start to read. “The petitioner, Jacob Pereira, says he handed you a diamond ring on June 22, 1671, in the synagogue in Houtgracht and in the presence...

  10. 8 Information
    (pp. 143-164)

    It was the beginning of March 1688 and, as it was every year, a busy time for share traders. March was the month of the annual meeting of the Lords Seventeen, the VOC’s highest executive board, composed of directors from all six chambers. The decision about the dividend to be paid was a permanent item on the agenda. In those days, Jeronimus Velters was the clerk for the city of Amsterdam and a very active share trader. Loath to miss any rumor or piece of news about the upcoming dividend, he went to the exchange and Dam Square every day....

  11. 9 Trading Clubs
    (pp. 165-183)

    On march 7, 1667, Sebastiaen da Cunha was sitting in a nearly deserted courtroom at the Supreme Court of Holland in The Hague. The only others present were his lawyer and the justices of the court. And this was not the first time. Last year, the defendants in this case—Michiel Rodrigues Mendes, Isaack Mendes da Silva, Mozes da Silva, Mozes Machado, Joan Corver, Luis Gonsales de Andrada, Manuel Lopes Villareal, Gerrit van Beuningen, and Cornelis Lock—had failed to appear on three occasions.

    Two years before, in early 1665, da Cunha bought a forward contract for the delivery of...

  12. 10 Speculation
    (pp. 184-201)

    The back room in De Plaetse Royael tavern was stuffy and full of smoke. Even on a hot summer evening like this one, August 8, 1678, many members of the Collegie van de Actionisten trading club went there to buy and sell shares. That evening Hubertus Beens was there. He had received instructions from Hubertus Pollius to sell shares. As he entered the airless room he encountered Mozes Machado. They began discussing the share trade, and the conversation soon turned to the war with France.

    Nearly five years had passed since the last French troops had been driven out of...

  13. 11 Crisis
    (pp. 202-227)

    The spring and summer of 1672 was the busiest period that the notary Adriaen Lock could remember. While the Republic was being attacked on all sides, Lock—always accompanied by two witnesses—walked from the house of one share trader to another. He knocked on each door, and when it was opened he read out a notarial writ.

    He had to visit four share traders on May 18. Fortunately they lived close together, in the Jewish quarter. The first three men the notary visited were not at home, so he read the writs to Miguel Rodrigues Nunes’s daughter, Juan Mendes...

  14. 12 The World-Famous Book Again
    (pp. 228-236)

    The merchant and the philosopher in Joseph Penso de la Vega’sConfusión de confusionesboth lost money in the crash of 1688. They complained about it to the shareholder, who responded by saying that they did not come out of it too badly. The crash had hurt him much more.

    One does not have to be an Atlas to take a share on one’s account, to pledge it or take delivery of it, for since honor is not in jeopardy, the loss can be recovered by persistence. But I am in so deep that I no longer make jests about...

    (pp. 237-244)

    In the seventeenth century, large-scale trading in shares and derivatives was unique to Amsterdam, although there were companies outside the Republic that had issued shares when they were founded. The East India Company (EIC) was established in England in 1600, and there were enterprises financed through shares in Italian city-states like Genoa and Venice as early as the late Middle Ages. However, the shares in these Italian and English companies were rarely, if ever, traded—chiefly because these enterprises were much smaller than the VOC and, unlike the Dutch Company, did not have long-term aims. Shareholders in the EIC, for...

  16. Acknowledgments and Overview of Literature and Sources
    (pp. 245-258)
  17. Notes
    (pp. 259-274)
  18. Glossary
    (pp. 275-278)
  19. Bibliography
    (pp. 279-284)
  20. Index
    (pp. 285-296)