Microstructure of the First Organized Futures Market

This book is the first comprehensive account of the rules and practices-the microstructure-of the Dojima Security Exchange (DSE), the world’s first futures market. Despite worldwide interest in the DSE and its relevance to modern financial markets, it is only briefly touched upon as the earliest example of a futures market in most of the existing literature in English.  Until the publication of this book, there has been no comprehensive account in English of the rules and practices of the DSE.

The DSE emerged in Osaka, Japan, around the turn of the eighteenth century. In Tokugawa Japan (1603–1867), the shogunate and local lords levied taxes in rice and exchanged rice for currency in rice markets to finance their expenditures.
Osaka had the biggest rice market in Japan throughout the Tokugawa period, and most local lords stored rice in their own warehouses in Osaka, selling rice at auctions. Successful bidders received “rice certificates” instead of rice itself, and each rice certificate could be exchanged for a pre-specified quantity of rice any time before its expiration at the issuer’s warehouse. These certificates and the futures contracts based on them were actively traded in a market located in Dojima, an area in Osaka. This market was officially approved by the Tokugawa Shogunate in 1730 as the Dojima Rice Exchange. Despite its official name, no rice was actually traded in this market. This historical fact is emphasized by referring to it as the “Dojima Security Exchange” (DSE) in the proposed book.