In the Beginning: From Ledger to Settlement
Today’s clearing and settlement system for securities trading evolved from double-entry ledgers invented in the 14th century.
The ledger revolutionized trading in Europe, allowing multi-party transactions to occur over a span of time and across countries, to be recorded on one day in a central location.
Spurred by further innovations in 16th century Venice, ledgers produced important effects to Europe’s legal and payments systems:
- Creditors began to use ledgers as evidence in court to force debtors to pay.
- Credits and debits for future payment became a medium of exchange, creating a system for moving money backwards and forwards through time.
- The ability to pledge payments in the future greatly expanded access to credit.
- Europe’s money supply was no longer limited by the physical amount of gold and silver circulating