ABSTRACT
In the earliest decades of the development of the secondary market for Verenigde Oost-Indische Compagnie (VOC) shares, traders started litigation to test the bounds of the existing legal concepts. Focusing on transaction costs helps to understand, how legal certainty can persuade people to invest: the formation of a clear legal framework reduced the costs of protecting contractors' rights and also of costly enforcement of agreements by a third party, i.e. the court. The participants of the forward market were aware of short sales. The Court of Holland in pronouncing judgement on share-trade-related court cases drafted the world's first securities law. The local court of Amsterdam could very well deal with most of the share-trade-related conflicts. Traders lost confidence in the institutions of the tulip trade. A self-regulatory mechanism was a sine qua non for the scale of forward trading of the second half of the seventeenth century.
