The Politics of Fragmentation: Liberalism, Market Equality, and the Technological Re-configuration of American Finance

• In Event: 225 - Regular Session. Economic Sociology: Infrastructures for Financial Markets

Abstract

This article examines the history of American financial infrastructures to answer the question of how moral politics shaped the recent organization of stock exchanges and indirectly led to the emergence of the controversial financial activity known as high-frequency trading. Specifically, the article explores the history of a failed market initiative, the Centralized Limit Order Book (CLOB), as a means for constructing an alternative narrative on the location of neoliberalism in American finance. Imagined by the Securities and Exchange Commission in the 1960s as the technological lynchpin of the national US stock market, CLOB was an intensely contested project that sought to unify all stock exchanges under a single trading system. In discussing CLOB, three frameworks of moral evaluation were mobilized by market actors in public debates. On the one hand, advocates of CLOB stressed its egalitarian virtues: centralizing a fragmented market hitherto dominated by a handful of stock exchanges would introduce much desired fairness to American finance. Opponents, however, highlighted the restrictive consequences of centralization: by standardizing markets, CLOB would hinder innovation and erode the liberty of a novel generation of financial entrepreneurs to transform the marketplace. Between these distinct moral evaluations stood the SEC, which sought to achieve a rational, pragmatic compromise for the entire marketplace. By exploring public debates around CLOB, the article reveals the differing varieties of liberal thought active in constituting American financial infrastructures. In doing so, the article presents high-frequency trading as the outcome of distinct moral projects to re-design the national US stock market.

Authors

• Juan Pablo Pardo-Guerra, London School of Economics and Political Science

• Donald McKenzie, University of Edinburgh