According to the most common accounts, the first stock exchange was established in Amsterdam following the initial public offering of the Dutch East India Company in 1602. However, Amsterdam was not the first city to earn the distinction of being a financial center. It was, after all, hardly the first time traders gathered in a city to trade in products, financial or physical. It was not even the first time this was done in a permanent setting with respect to financial instruments specifically. Indeed, the first bourse more generally was arguably founded three centuries earlier elsewhere in the Low Countries, in Bruges. It was even in Bruges where the word ‘bourse’ came to be used as it now is and where the model for future exchanges was created.

Bruges

           However unassuming it is today, the city of Bruges became the foremost commercial city in Northern Europe in the Late Middle Ages. Oddly enough, a violent storm helped make this so. In 1134, trapped storm waters restored an inlet to the sea that had previously silted up. Bruges is not on the coast but about 7 miles (12 kilometers) inland and has for centuries relied on canals to connect it to the sea. Nonetheless, the city replaced the trade fairs of Champagne as the most important mercantile gathering of the region, as cities became permanent centers of commerce, supplanting mobile medieval fairs.

           By the early 14th century, Bruges was home to merchants from all over Europe and was also home to the agents and brokers who connected them with their counterparts from other nations. These merchants came from places as far apart as the German Hanseatic port cities and the Italian commercial centers of Genoa and Venice; all established a presence in Bruges because it had become the largest mercantile agglomeration in Europe.

           At its peak in the 1300s, somewhere near 20% of the city’s population were merchants. Perhaps the majority of these came from abroad. Genoese traders began their activities in Bruges no later than in 1277 and were followed by those of other Italian city states. Through them, Italian financial innovations were introduced to Northern Europe long before the era of the Medici. One of these resident Italian merchants in Bruges was Giovanni Arnolfini, the groom in the famous Jan van Eyck painting, The Arnolfini Wedding.

The Arnolfini Wedding, Jan van Eyck

Van der Beurse

           Larger merchants doing business in the city established fixed offices of their own; a break from the nomadic existence of merchants in the era of medieval trade fairs. If there was business abroad to attend to, this was increasingly done by correspondence. Those unable to afford a permanent establishment of their own in Bruges stayed in one of the city’s inns. The van der Beurse, a family in the real estate business, owned one of these inns popular with merchants. The ‘Ter Beurse Inn’, established in 1285, was one of a set of properties owned by the van der Beurse in the center of Bruges. The family was prominent in the city; a number of its members served as mayor, or burgemeester, of the Flemish city.

           The Ter Beurse Inn housed foreign merchants who found its location on a prominent city square, the Beursplein, convenient. In the 14th century, traders congregated there to buy and sell bonds and bills of exchange, a money market instrument used as a substitute for cash in trade. In addition to bonds and bills, commodities and insurance were traded as well. The square was also near law courts and notaries and the innkeepers functioned as brokers, making introductions between traders of different nations. All the vital services were nearby. Trading in the square would simply move indoors into the Ter Beurse Inn when it rained.

The Beursplein and environs

           Together, the Beursplein and the inn, the third building from the left in the print above, were the commercial and financial center of late medieval Bruges. They functioned like a modern exchange. Through technically public, entry into the square was limited, there were fixed trading hours, and the market opened and closed to a bell. Through the inn and the square, the van der Beurse family gave their name to the word ‘bourse’, the term used to identify stock exchanges and other financial markets in several languages, from bourse in modern French and English to borse in German and borsa in Italian. Thus, along with their role in the history of Bruges, the van der Beurse made a contribution to the vocabulary of finance as well.

           The role of the Beursplein as perhaps the most significant financial market in Northern Europe brought substantial development to its surroundings. Near the Beursplein were several ‘nation houses’. These were facilities set up by various trading nations to serve their merchant communities in the city. They also functioned as consulates representing those cities, like Lucca and Florence, in Bruges.

           In the late 14th century, the Ter Beurse Inn itself was converted into the Venetian nation house in Bruges. The building stands to this day. The Genoese house was established just across an alley from the old inn and the Florentine house opened across the square. The former is the second building from the left in the print above and the latter is across from the inn, the building with the two thin spires.

Finance

           Even the trade in physical commodities conducted on the Beursplein created a need for financial services. Among these was the demand for money changers. By virtue of the trade conducted between merchants of different countries, the city became a hub for foreign exchange transactions. The going exchange rates for various currencies in Bruges were published regularly. The money changers who served the need for currency conversions also took deposits and some lent by allowing customers to overdraw their accounts.

           The Ter Beurse Inn itself also provided a basic financial service to its guests, namely holding their money for safekeeping. This took on some significance, and proved problematic, when one in the line of family innkeepers, Laurens van der Beurze, died in 1351. The money entrusted with him was caught up in his estate and placed after local creditors’ claims in priority. This incident alone is said to have tarnished the image of Bruges as a favored trading city and weakened the relationship between the city and the affected Hanseatic merchants.

Future Bourses

           In the end, Bruges had another century as the hegemonic trading city of the Low Countries and all of Northern Europe. However, it was steadily replaced by Antwerp as the 15th century went on. A commodity exchange opened in Antwerp in 1485 and the city became a center for global trade in textiles, metals, and spices, an increasingly important trade in the Age of Discoveries. Antwerp itself was later replaced by Amsterdam as the commercial capital of the North Sea region in the late 16th century following the former city’s occupation by the Spanish during the Dutch War of Independence. The bourse established in Amsterdam in 1602 became the first stock exchange in the world.

Lesson

             The stock exchange in Amsterdam and perhaps every other exchange owes something to Bruges. For one, a prominent family in the city became the etymological origin of the very word ‘bourse’ but more significantly, the role of the city itself marks a turning point in Europe’s economic history, the transition from Italian and Mediterranean-oriented trade to an Atlantic and global trade later dominated by the French, English, and Dutch. Regardless though, the commercial and financial institution established on the Beursplein was perhaps the model, direct or indirect, for every exchange to come, whether in Antwerp or Amsterdam.

More from the Tontine Coffee-House

Giovanni Villani was an Italian businessman and financial chronicler in Bruges; learn what he reveals about some of the oldest financial firms in history. Also, discover how the first initial public offering helped make Amsterdam a financial center.

Further Reading

1.      Houtte, J. A. Van. “The Rise and Decline of the Market of Bruges.” The Economic History Review, vol. 19, no. 1, 1966, pp. 29–47.

2.      Kohn, Meir G. “Organized Markets in Pre-Industrial Europe.” SSRN Electronic Journal, July 2003.

3.      Murray, James M. Bruges, Cradle of Capitalism, 1280-1390. Cambridge University Press, 2005.

4.      Roover, Raymond de. Money, Banking and Credit in Mediaeval Bruges a Study in the Origins of Banking. The Mediaeval Acad. of America, 1948.

5.      “The Stock Market: from the ‘Ter Buerse’ Inn to Wall Street.” Museum, National Bank of Belgium, 4 Jan. 2010.

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