The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam

24 Pages Posted: 16 Sep 2010

See all articles by Edward Peter Stringham

Edward Peter Stringham

Trinity College; American Institute for Economic Research

Date Written: December 18, 2001


It is often argued that government rule enforcement is necessary for the development of a stock market (Glaeser, Johnson, & Shleifer, 2001). Work by Boot, Stuart, and Thakor (1993), Klein and Leffler (1981), and Telser (1980), however, suggests that repeated interaction and reputation can create incentives for contracts to be self-enforcing. This paper investigates these claims by examining the first stock market, the Amsterdam Bourse. At a time when many financial contracts were unenforceable in government courts the market developed surprisingly advanced trading instruments. Descriptions by seventeenth-century stockbroker, De la Vega [Confusion de Confusiones], indicate that a reputation mechanism enabled extralegal trading of relatively sophisticated contracts including short sales, forward contracts, and options.

Keywords: Extralegal, Enforcement, Reputation

JEL Classification: L14, N23, G28

Suggested Citation

Stringham, Edward Peter, The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam (December 18, 2001). Quarterly Review of Economics and Finance, Vol. 43, No. 2, p. 321, 2003, Available at SSRN:

Edward Peter Stringham (Contact Author)

Trinity College ( email )

Hartford, CT 06106
United States

American Institute for Economic Research ( email )

PO Box 1000
Great Barrington, MA 01230
United States

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