ABSTRACT
This chapter describes the rise of the commodity exchanges and their private arbitration commissions during the period 1990–1994. It outlines the problem facing brokers on the exchange and explains their reluctance to use private arbitration commissions to the fear of taxation by the state. The chapter presents an interpretation for the rise of private protection organizations and compare the merits of state versus private protection of property rights. Members of rotating credit associations, private arbitration courts, and professional organizations transmit information about an actor’s reputation, levy sanctions, and thereby deter fraud without turning to the state. The case of commodity exchanges in post-Soviet Russia highlights several interesting facets of the debate. Commodity exchange officials attempted to engage in self-governance by creating private arbitration commissions. Brokers, however, shunned these commissions because providing evidence to the court required revealing information about their trades, which left them subject to high rates of taxation by the state.
