The “Early Forward Exchange Markets, 1876-1914” database isbackground for Marc Flandreau and John Komlos, “Target Zones inTheory and History: Credibility, Efficiency, and Policy Autonomy,”Journal of Monetary Economics, forthcoming. The pre-publication version of the paper is available at

This is the first publicly available database fornineteenth-century forward exchange markets. Futures in suchcommodities as grain and wool were common practice in the MiddleAges,[1] and futures in peppers were traded inHolland of the sixth century. Futures in stocks of the DutchEast-India company came into being shortly after its founding in1602.[2] Futures transactions gainedconsiderable importance in the course of the nineteenth century, somuch so, in fact, that by the 1880s most of the volume on theLondon stock exchange was said to be in forwardtransactions.[3] The institutions andlegal framework for this niche of the financial markets evolvedduring the course of the century, with a landmark being thefounding of a clearing house in futures in Berlin in 1869, ahead ofLondon.[4] Contracts were generally dated atultimo, that is, at the end of the month, although some exchangesalso permitted medio contracts due at the middle of the month, andlonger contracts were also known.[5]

Futures in foreign exchange facilitated transactions in bothgoods and securities across borders if both countries were not onthe same commodity standard. Thus, there was no reason for futuresamong the German reichsmark, the French franc, or the poundsterling to develop, because all were on the gold standard in thelate nineteenth century. However, among the ruble, mark, and thegulden such a need did exist, insofar as Germany was both Russia’sand Austria-Hungary’s most important trading partner, and both wereeffectively on a flexible exchange rate until the 1890s. The valueof the gulden did vary enormously in the final third of thenineteenth century, and its gyrations could be quite dangerous forinternational financial transactions. It was in this climate ofuncertainty that the biggest market in currency futures came intobeing in Central Europe.

Thus Central Europe was a leader of financial innovation in theforeign exchange market.[6] A largeforward market in rubles came into being – first in Breslau andKönigsberg – and then in Berlin,[7] and futuresin rubles were also traded in Vienna.[8]Berlin lost its dominant position in futures in rubles at the endof 1894 when the Russian Finance minister announced that thegovernment intended to defend a fixed exchange rate, and theRussian Central Bank began publishing these rates beginning inmid-April 1895.[9] Gulden-mark futures cameinto being out of the same considerations, probably well before thedata began to be published in the1870s.[10]

In Vienna, as in other European markets, there was also aforward market in general securities. These forward transactionswere to be settled – liquidated – in a major settlement proceduretaking place at the end of the month. The settlement date andoperation was named after the French word “liquidation,”which designated the same operation occurring every fortnight inthe Paris official market. As emphasized by Haupt [1894],international arbitrage in securities was a routine operation inlate-nineteenth-century Europe that brought substantial profits. Itrested on lending securities where the “report” rate (differencebetween spot and forward price) was high and borrowing money wherethe rate was low. Doing so, however, involved an element of riskdue to the possibility of exchange fluctuations. This wasespecially a problem for arbitrage between western Europeanfinancial centers and Central and Eastern ones such as Vienna andSt. Peterburg, which had close financial connections with WesternEurope (large chunks of Russian or Austro-Hungarian securities wereheld in Western Europe), but which experienced violent exchangerate movements. Obviously, the only way to be covered against thesefluctuations was to have a forward exchange market that would clearat the same dates as the markets for forward securities, and thusenable one to perform a “true” (i.e. risk free) arbitrage. It isthus not surprising to find that, along with the ultimo quotes forgeneral securities there were also in Vienna ultimo quotes forGerman marks and Russian rubles, in addition to the spot (or percassa) rates. Not surprisingly, the settlement dates for bothforward securities and forward exchange operations coincided: itwas the end-of-month “liquidation.”

Interestingly, this provides a rationale for the development ofthe forward markets that points to the combined influence offloating exchange rates and international financial arbitrage. Toconclude, we should emphasize that these genuine forward exchangerates should not be mixed up with quotes for time deposits inforeign currency, such as three months bills, that some authorshave mistakenly described as “forward” exchange rates. Purchases ofthree months bills implied a present purchase of a bill maturing ina foreign market several weeks later, while the genuine forwardcontracts to which this database refers, like today, were onlyagreements to perform a foreign exchange transaction at a futuredate. The difference between the two financial instruments istherefore obvious.

Our exchange rate data was collected from the WienerBörsekammer Coursblätter, in the archive of the Wiener BörseA.G., Strauchgasse 1-3, A-1014 Vienna, Austria. Schneider et al.[1990] and Schneider et al. [1993] have spot, but not forwardrates. Forward rates for the next “liquidation” were also publishedin the Wiener Zeitung as well as in the Neue FreiePresse. A comparison among the three sources indicated onlymarginal deviations. The other possible official market source isthe Amtliches Coursblatt der Wiener Börse. We havecompared monthly quotations for the Amtliches Coursblatt derWiener Börse and the Wiener Zeitung between 1904 and1907 (inclusive) and have not found any discrepancies at all in thequotations for the spot rates and just one slight variation in theforward quotations during these four years.

The reason for preferring the Coursblatter is that itis more systematic in that it gives a series of quotes, day high,day low, mid day, closing. Closing quotes were the mostcomprehensive and were thus the ones we collected. Spot (per cassa)exchange rates with Germany are reported from January 1870 untilthe summer of 1914 in all three sources. Until February 1873,though, they are reported in florins per 100 marks bancos, theHamburg unit (Hamburg was Germany’s prominent foreign exchangemarket until Germany’s monetary unification which shifted businessto Berlin). Rates switched to German marks in February 1873 withthe advent of the new German currency. In order to obtain ahomogeneous series in florins per mark, we divided the quotes inMark Banco by 1.5. The sources report both “Geld” and “Waare”rates. “Geld” prices were the bid price, the price at which peoplewere willing to buy foreign exchange and offering local money.“Waare” was the price at which people were offering to sell the”goods” (in this case Marks). Forward rates are available fromNovember 1876 until June 1889 under the heading “LiquidationsCourse,” but no distinction was made between bid and ask rates.From July 1889 onwards, the forward rates were quoted as Ultimo,and the distinction between bid and ask rates appeared. Moreover,from January 1900 quotes are given in Crowns per 100 mark and thequotes were divided by two in order to produce a homogeneousseries. Given that forward rates are quoted for the end of themonth (liquidation date), the best date to collect the figures isthe first day of the month after the previous liquidation.When this was a bank holiday, we collected the next availablequote. Three observations need special mention:

We then constructed two series. A series of average bid/askrates ({Geld(t)+Waare(t)]/2, 1876:11-1914:7) and a series of bidrates (1889:7-1914:7). The database consists of florin/markexchange rates (number of florins for 100 marks) and spans theperiod 1870:1-1914:7 (spot rates) and 1876:11-1914:7 (forwardrates). Since study of forward exchange rates typically alsoinvolves exercises on covered interest parity conditions, data forinterest rates (private and official) in both Vienna and Berlin arealso provided. They were collected from same sources at same datesfor Vienna. German interest rates were collected from TheEconomist, Der deutsche Ökonomist, and the FrankfurterZeitung, at matching dates. Additional details are provided inthe tables.

  1. Archives
    • Wiener Börsekammer Coursblätter, in the archive of theWiener Börse A.G., Strauchgasse 1-3, A-1014 Vienna, Austria
    • Amtliches Coursblatt der Wiener Börse, in thearchive of Crédit lyonnais, Bayeux, France.
  2. Periodicals
    • Deutsche Ökonomist
    • The Economist
    • Frankfurter Zeitung
    • Neue Freie Presse
    • Wiener Zeitung

[1] Reinhold C. Mueller, TheVenetian Money Market. Banks, Panics, and the Public Debt,1200-1500 (Baltimore: The Johns Hopkins University Press,1997), p. 149. The Artesian-Flemings in the 12th century (WilliamCade of St. Omer) and the Italian merchant firms of the later 13thcentury – such as the Riccardi, the Bardi, the Bettore, theFrescobaldi Bianchi e Neri, — frequently bought futures expressedas loans: they would make agreements with various monastic estatesto provide these estates with immediate cash payments or loans inreturn for a guarantee to supply specific amounts of wool, up tothree years in advance. John Munro, ‘Wool-Price Schedules and theQualities of English Wools in the Later Middle Ages, ca.1270-1499,’ Textile History, 9 (1978): 118-69 (esp. pp.126-29).

[2] Herbert Schlicht,Börsen-terminhandel in Wetpapieren (Frankfurt: FritzKnapp Verlag, 1972), p. 25.

[3] Emil Struck, „Die Effektenbörse. EineVergleichung deutscher und englisher Zustände,“ Staats-undsocialwissenschaftliche Forschungen, 3 (1881) 3, 1-244; herep. 27.

[4] Struck, „Die Effektenbörse,» p. 37.

[5] . The actual ultimo price was not easyto determine by any means, because of the imminent danger ofmanipulation of the market through bogus sales. As a consequence,an elaborate mechanism was brought into being for the determinationof the ultimo price, with a sworn committee of experts making thefinal judgment call Obviously, in order for a future transaction totake place, expectations of future prices need to vary. For everyseller of a futures contract there had to be a buyer. At ultimo,however, the financial instruments did not actually have to changehands. The account could be settled by paying the differencebetween the spot price and the agreed upon futures price. (In fact,contract could actually specify that the instruments would not beexchanged in any event, only the difference in value would bepaid.) Yet, the parties to the ordinary contract (say, A and B)could well demand that the financial instrument be actuallydelivered. In that case, if the seller (A) did not possess theinstrument, but B wanted to take possession, A had to purchase itin the open market. However, an aftermarket developed which enabledA to borrow the instrument for a month from a third party (C)without investing the whole value of the financial instrument; thecontract between A and C stipulated that A would return the sameinstruments to C at the next ultimo. A’s position of borrowing wasknown in the commercial language of the time as Deport, and C’sposition of selling was known as Report. Similarly, it might be thecase that A had the instruments in hand and wanted B to takepossession, but B did not have the money to pay A. In such a case Bcould lend the instruments to someone who did have the money, D,with the promise of repurchasing them at ultimo. Thus, the reportmarket was an aftermarket of the futures market, but the reportmarket did not exist in currency. Struck, „Die Effektenbörse,» pp.30-39. For a study of the development of the market for reports seeFlandreau and Sicsic 2000.

[6] Lotz Walther, “Die Währungsfrage,” p.1279.

[7] Gerhart v. Schulze-Gävernitz,Volkswirtschaftliche Studien aus Russland (Leipzig:Duncker & Humblot, 1899), pp. 503-504.

[8] Knapp, Staatliche Theorie desGeldes, p. 252. That there was no such organized counterpartwithin Russia itself, and that the Russian government charged aBerlin bank to intervene in the markets in such a way as tomaintain the value of the Rubel, is a clear sign of theunderdevelopment of Russian financial intermediation. In a sense, aGerman private bank assumed functions otherwise associated with acentral bank.

[9] Schulze-Gävernitz,Volkswirtschaftliche Studien, pp. 527-30.

[10] Einzig, p. 31-38. There wereforward markets in Vienna in other major currencies, but these weresmall and were not quoted in the official publications. (Anexception was the 20 French Franc gold piece and the rubel whichwere quoted forward). Walther Federn, „Das Problem gesetzlicherAufnahme der Barzahnlungen in Österreich-Ungarn,“ SchmollersJahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft 34(1910), pp. 151- 172, here p. 164.