headed by Isaac Le Maire was formed around 1609 to gain by manipulating prices to fall using long dated forward short sales in order to purchase stock in the cash market at lower prices. “It is not clear that the ring did more than help to hold down the already slumping prices, but the company lodged a protest with the States of Holland and West Friesland in the summer of 1609 to have a ban placed on the sale of shares blanco’” (De Marchi and Harrison 1994, p.51). ‘in The result was the Dutch edict of 1610 banning short sales blanco’, where, at the time of the ‘in short sale, the seller does not actually possess the shares being sold. In addition, the edict required that share be made within one month of the sale date. The ban on short sales was not permanent and the of renewal brought out anew sentiment for and against “occasion (p.51). Despite opposition, the ban on in the wind’, or trade, was VOC” windhandel ‘selling repeated in 1624, 1630, 1636 and 1677. It is important to recognize that the impact of de facto the ban on in blanco short selling was to make such contracts unenforceable in the courts. There was no direct criminal penalty for entering into such contracts which provided the basis for difference dealing among the close knit community of brokers and dealers that dominated the stock and commodity trade on the Amsterdam exchange. Though the ban on in blanco short selling technically applied to both commodities and stocks, the character of speculative trading in commodities was less affected due to the practical need for bourse speculators to have a connection to the underlying goods trade. No such constraint was associated with stocks. Without the discipline of exchange trading, the potential for abuse of non-transferable forward contracts with option features in the loosely organized Amsterdam share market was considerable. In turn, the ban did not eliminate speculative trading. Rather, the characteristics of trading were altered. Though the Amsterdam exchange had unrestricted access, the exchange also facilitated concentration of commercial activity. Exchange trading was
headed by Isaac Le Maire was formed around 1609 to gain by manipulating prices to fall using long dated forward short sales in order to purchase stock in the cash market at lower prices. “It is not clear that the ring did more than help to hold down the already slumping prices, but the company lodged a protest with the States of Holland and West Friesland in the summer of 1609 to have a ban placed on the sale of shares ‘in blanco’” (De Marchi and Harrison 1994, p.51). The result was the Dutch edict of 1610 banning short sales ‘in blanco’, where, at the time of the short sale, the seller does not actually possess the shares being sold. In addition, the edict required that share be made within one month of the sale date. The ban on short sales was not permanent and the “occasion of renewal brought out anew sentiment for and against VOC” (p.51). Despite opposition, the ban on ‘selling in the wind’, or windhandel trade, was repeated in 1624, 1630, 1636 and 1677. It is important to recognize that the de facto impact of the ban on in blanco short selling was to make such contracts unenforceable in the courts. There was no direct criminal penalty for entering into such contracts which provided the basis for difference dealing among the close knit community of brokers and dealers that dominated the stock and commodity trade on the Amsterdam exchange. Though the ban on in blanco short selling technically applied to both commodities and stocks, the character of speculative trading in commodities was less affected due to the practical need for bourse speculators to have a connection to the underlying goods trade. No such constraint was associated with stocks. Without the discipline of exchange trading, the potential for abuse of non-transferable forward contracts with option features in the loosely organized Amsterdam share market was considerable. In turn, the ban did not eliminate speculative trading. Rather, the characteristics of trading were altered. Though the Amsterdam exchange had unrestricted access, the exchange also facilitated concentration of commercial activity. Exchange trading was
ch_3_gsm-hist_gp_$.docx