Before the exchange: merchants, brokers and bills of exchange

The Kaufmännisches Direktorium and the regulation of brokers

Zurich had markets long before it had an exchange. The need for intermediaries who brought buyers and sellers together was felt first in the trade in goods and in bills of exchange. The body that ordered this trade for almost two centuries was the Kaufmännisches Direktorium, whose founding charter was confirmed by the city council on 30 October 1662. It had grown out of the needs of the rapidly expanding textile trade of the late sixteenth century, which by the middle of the seventeenth century required a standing organisation of the merchants. Seven elected directors, increased to twelve after 1710, regulated customs matters, the postal service and the business of the brokers, supervised the putting-out workers of the textile industry, enforced quality rules and arbitrated commercial disputes. The Direktorium also employed Sensale, brokers who worked for commission, and financed its activities through levies on imported and exported textiles collected in a Direktorial-Fond.¹

As an institution of the Ancien Régime, the Direktorium depended on privileges that the French Revolution and the Helvetic Republic swept away. When the postal monopoly passed to the state in 1803, it lost its most profitable activity. In 1834 it was superseded by a cantonal chamber of commerce and thereafter administered mainly its considerable accumulated assets, which the archival description of the Staatsarchiv puts at more than 1.14 million gulden. For the history of the exchange the Direktorium matters because it established two traditions that survived its dissolution. The first was the idea that intermediaries in commercial transactions should be subject to a public order of conduct, with rules on who might act as a broker and on what terms. The second was the practice of merchants meeting at fixed times to exchange information, settle bills and agree prices, a practice that the centenary history of the Zurich exchange describes in its opening chapter under the eighteenth-century heading of “Kauffmanns-Zusammenkünffte, Mäckler, Sensale und Wechselbriefe”.²

The Sensalenordnungen of the old city regulated a trade in which the objects of brokerage were silk, cotton, cloth and bills of exchange drawn on Lyon, Frankfurt, Augsburg or Venice. Shares and bonds played almost no part. The Zurich merchant houses described in Part C of this book financed themselves from their own capital, from family deposits and from the returns of the putting-out system, while the public debt of the city-state was small and largely held by domestic institutions. Where Zurich capital went into securities, as in the investments of Leu & Co. in foreign public debt from 1755 onwards, the transactions were negotiated directly between the institution and foreign bankers, without a local market in which prices were formed publicly. In the eighteenth century, the Canton of Bern held shares in the English South Sea Company, an early example of Swiss public capital invested in foreign equities.³ Such holdings were exceptional. For most of the old Confederation there was no public securities market at all.

Why Zurich came late to securities trading

Zurich was, at the beginning of the nineteenth century, one of several Swiss commercial towns of roughly comparable weight. The Historisches Lexikon der Schweiz observes that until the middle of the century Zurich lagged behind Basel, Geneva and St. Gallen as a financial place.⁴ Geneva had its tradition of private bankers engaged in French public finance, while Basel had a group of merchant bankers with close ties to Alsace, southern Germany and the Rhine trade. Zurich’s capital was invested mainly in its own textile industry. The Helvetic Republic and the Mediation period had interrupted the old regulation of brokers without putting a new order in its place. Because the Restoration cantons were small, fragmented jurisdictions with separate coinages, trading securities across cantonal borders remained difficult.

The coming of the railways changed the scale of capital that had to be raised. Railway companies needed tens of millions of francs, far beyond the resources of individual merchant houses, so that the shares and bonds they issued had to be distributed among a large public of investors. A handbook chapter on the Swiss equity market observes that the country’s comparatively slow industrialisation and its high proportion of privately held firms delayed the appearance of an exchange, and that only the huge financing needs of the second half of the nineteenth century, above all for railways, created demand for public equity finance.⁵ The Federal Constitution of 1848, the Coinage Act of 1850 and the Railway Act of 1852, discussed in Part C and in Chapter D.I, created the conditions for such a market by unifying the currency, abolishing internal customs and leaving railway construction to private companies.

Notes

1. Staatsarchiv des Kantons Zürich, “D Archiv des Kaufmännischen Direktoriums, 15. Jh.–19. Jh. (Fonds)”, archival description, https://suche.staatsarchiv.djiktzh.ch/detail.aspx?ID=259089. The description names the charter of 30 October 1662, the seven (later twelve) directors and the brokerage functions. ↩
2. Hans Rudolf Schmid and Richard T. Meier, Die Geschichte der Zürcher Börse, published by the Effektenbörsenverein Zürich for the exchange’s centenary, table of contents (chapters “Von Kauffmanns-Zusammenkünfften, Mäcklern, Sensalen und Wechselbriefen”, “Das Sensalenwesen im Staate ‘Meiner Gnädigen Herren’”, “Das Kaufmännische Direktorium”, “Die erste Sensalenordnung von Zürich” and “Die Sensale Zürichs bis zum Umsturz 1798”), https://urn.ub.unibe.ch/urn:ch:slsp:zbz:991132393929705501:ihv:pdf. ↩
3. Swiss Finance Museum (SIX), “The history of trading”, https://www.finanzmuseum.ch/en/home/visit/guided-tours/history-of-trading.html, which refers to Bern’s acquisition of South Sea Company shares between 1719 and 1734. The Bern banking crisis of 1720 is a reminder that Swiss investors took part in the speculative episodes of that decade. ↩
4. Historisches Lexikon der Schweiz (HLS), Nicola Behrens, “Zürich (Gemeinde)”, version of 25.01.2015, http://www.hls-dhs-dss.ch/textes/d/D171.php. ↩
5. “Swiss Equity Markets”, chapter 9 in a Springer volume on European equity markets (2023), https://link.springer.com/chapter/10.1007/978-3-031-23194-0_9. The authors state that these needs “overwhelmed traditional private financing sources, such as bank loans and net earnings”. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.