Skip to main content

Where are the market devices? Exploring the links among regulation, markets, and technology at the securities and exchange commission, 1935–2010

Theory and Society volume 49, pages 245–276 (2020)Cite this article

Abstract

This article examines regulation’s understanding of technology in American financial markets as means for rethinking the contours and institutional limits of governance in the age of financialization. The article identifies how the Securities and Exchange Commission perceived markets and their conceptual relation to technology throughout much of the long twentieth century by distilling the “ontologies” expressed by the agency’s leadership. Despite the fact that SEC’s commissioners recognized technologies as playing a central role in the market’s current and future operations, these were never effectively brought under regulatory scrutiny even when such action fell under the commission's jurisdictional remit. Rather than regulating technologies as constitutive of markets, the governance of the material devices of finance was discursively kept at arm's-length by presenting them as intractable objects that were external to financial innovation. Triangulating across several techniques of computational text analysis, this article shows how this interpretation of technology mirrored distinct shifts in how regulators understood markets, from being physical trading sites populated by agents that required vetting and certification to a distributed, multi-sited system surveilled through transparency and disclosure. Throughout these ontological transitions, technology’s inscrutability remained, limiting the capacity of the state and its regulatory agencies to shape the evolution of finance and its underlying infrastructures.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Fig. 1
Fig. 2
Fig. 3

Notes

  1. The 15 topic models were grouped into 5 themes through the following coding strategy. The theme of “corporations” was composed of the topics of “corporate governance,” “corporate disclosure,” “corporate finance,” and “public companies.” The theme of “intermediaries” is formed by the topics “investment intermediaries,” “investment managers,” and “public offers.” The theme of “enforcement” is formed by the topics of “enforcement,” “public mandate,” and “rulemaking.” “Market organization” included the topics “market structure,” “global markets,” and “accounting standards.” Finally, the theme of “disclosure” combined the topics of “accounting” and “investment information.”

References

  • Aguilar, L. (2015). “U.S. equity market structure: Making our markets work better for investors”. May 11, 2015.

  • Aldridge, I. (2013). High-frequency trading: A practical guide to algorithmic strategies and trading systems (Vol. 604). Hoboken: John Wiley & Sons.

    Google Scholar 

  • Angel, J., Harris, L., & Spatt, C. (2011). Equity trading in the 21st century. The Quarterly Journal of Finance, 1(1), 1–53.

    Google Scholar 

  • Arnoldi, J. (2012). "Cheating models: Algorithmic trading and the normative reconfiguration of financial trading." Paper presented at Unpacking the Crisis, University of Edinburgh.

  • Bail, C. A. (2014). The cultural environment: Measuring culture with big data. Theory and Society, 43(3–4), 465–482.

    Google Scholar 

  • Bakhtin, M. (1994). The Bakhtin reader: Selected writings of Bakhtin, Medvedev, and Voloshinov. London: Bloomsbury.

    Google Scholar 

  • Bealing, W. E. (1994). Actions speak louder than words: An institutional perspective on the securities and exchange commission. Accounting, Organizations and Society, 19(7), 555–567.

    Google Scholar 

  • Bearman, P. S., & Stovel, K. (2000). Becoming a Nazi: A model for narrative networks. Poetics, 27(2–3), 69–90.

    Google Scholar 

  • Black, J. (2013). Reconceiving financial markets—From the economic to the social. Journal of Corporate Law Studies, 13(2), 401–442.

    Google Scholar 

  • Brandes, U. (2001). A faster algorithm for betweenness centrality. Journal of Mathematical Sociology, 25(2), 163–177.

    Google Scholar 

  • Breslau, D. (2013). Designing a market-like entity: Economics in the politics of market formation. Social Studies of Science, 43(6), 829–851.

    Google Scholar 

  • Burk, J. (1988). Values in the marketplace: The American stock market under federal securities law. New York: Transaction Publishers.

    Google Scholar 

  • Callon, M., & Muniesa, F. (2005). Peripheral vision: Economic markets as calculative collective devices. Organization Studies, 26(8), 1229–1250.

    Google Scholar 

  • Callon, M. (1998). The laws of the markets. New York: Blackwell-Wiley.

    Google Scholar 

  • Campbell, J. L. (1998). Institutional analysis and the role of ideas in political economy. Theory and Society, 27(3), 377–409.

    Google Scholar 

  • Castelle, M., Millo, Y., Beunza, D., & Lubin, D. (2016). Where do electronic markets come from? Regulation and the transformation of financial exchanges. Economy and Society, 45(2), 166–200.

    Google Scholar 

  • Coeckelbergh, M. (2016). Money machines: Electronic financial technologies, distancing, and responsibility in global finance. London: Routledge.

  • Cortada, J. W. (2003). The digital hand: How computers changed the work of American manufacturing, transportation, and retail industries. New York: Oxford University Press.

    Google Scholar 

  • de Fontenay, E. (2017). The myth of the ideal investor. Seattle University Law Review, 41, 425.

  • Deakin, S., Gindis, D., Hodgson, G. M., Huang, K., & Pistor, K. (2017). Legal institutionalism: Capitalism and the constitutive role of law. Journal of Comparative Economics, 45(1), 188–200.

  • Denzin, N. K. (1978). Triangulation: A case for methodological evaluation and combination. Sociological methods, 339–357.

  • DiMaggio, P., Nag, M., & Blei, D. (2013). Exploiting affinities between topic modeling and the sociological perspective on culture: Application to newspaper coverage of US government arts funding. Poetics, 41(6), 570–606.

    Google Scholar 

  • Downer, J. (2011a). On audits and airplanes: Redundancy and reliability-assessment in high technologies. Accounting, Organizations and Society, 36(4–5), 269–283.

    Google Scholar 

  • Downer, J. (2011b). “737-cabriolet”: The limits of knowledge and the sociology of inevitable failure. American Journal of Sociology, 117(3), 725–762.

    Google Scholar 

  • Easley, D., & O'Hara, M. (1987). Price, trade size, and information in securities markets. Journal of Financial Economics, 19(1), 69–90.

    Google Scholar 

  • Fligstein, N., Brundage, J., & Schultz, M. (2014). "Why the Federal Reserve Failed to See the Financial Crisis of 2008." IRLE Working Paper No. 111-14, [forthcoming American Sociological Review].

  • Freeman, L.C. (1977) "A set of measures of centrality based on betweenness." Sociometry : 35-41.

  • Fourcade, M. (2009). Economists and societies: Discipline and profession in the United States, Britain & France. Princeton: Princeton University Press.

  • Gillis, J. G., & Dreher, R.G. (1982). Securities law and regulation: National market system. Financial Analysts Journal 13–15.

  • Girvan, M., & Newman, M. E. (2002). Community structure in social and biological networks. Proceedings of the National Academy of Sciences, 99(12), 7821–7826.

    Google Scholar 

  • Gruber, T. R. (1993). A translation approach to portable ontology specification. Knowledge Acquisition, 5, 199–220.

  • Grundfest, J. (1988). International Cooperation in Securities Enforcement: A New United States Initiative. Washington, DC: US Securities and Exchange Commission.

  • Karell, D., & Freedman, M. (2019). Rhetorics of radicalism. American Sociological Review, 84(4), 726–753.

    Google Scholar 

  • Kennedy, D. (2017). The machine in the market: Computers and the infrastructure of price at the New York stock exchange, 1965–1975. Social Studies of Science, 47(6), 888–917.

    Google Scholar 

  • Khademian, A. M. (1992). The SEC and capital market regulation: The politics of expertise. Pittsburgh: University of Pittsburgh Press.

    Google Scholar 

  • Kirilenko, A., Kyle, A. S., Samadi, M., & Tuzun, T. (2017). The flash crash: High-frequency trading in an electronic market. The Journal of Finance, 72(3), 967–998.

    Google Scholar 

  • Kitchin, R. (2014). Big data, new epistemologies and paradigm shifts. Big Data & Society, 1(1), 205–239.

    Google Scholar 

  • Knorr Cetina, K., & Preda, A. (2007). The temporalization of financial markets: From network to flow. Theory, Culture & Society, 24(7–8), 116–138.

    Google Scholar 

  • Krippner, G. R. (2011). Capitalizing on crisis. Cambridge: Harvard University Press.

    Google Scholar 

  • Lee, M., & Martin, J. L. (2015). Coding, counting and cultural cartography. American Journal of Cultural Sociology, 3(1), 1–33.

    Google Scholar 

  • Lee, R. (1998). What is an exchange?: Automation, management, and regulation of financial markets. Oxford: Oxford University Press.

    Google Scholar 

  • Lewis, M. (2015). Flash boys: Cracking the money code. London: Penguin Books.

    Google Scholar 

  • Lie, J. (1997). Sociology of markets. Annual Review of Sociology, 23(1), 341–360.

    Google Scholar 

  • MacKenzie, D. (2018). Material signals: A historical sociology of high-frequency trading. American Journal of Sociology, 123(6), 1635–1683.

    Google Scholar 

  • MacKenzie, D. (2008). An engine, not a camera: How financial models shape markets. Cambridge: MIT Press.

    Google Scholar 

  • MacKenzie, D. (2009). Material markets: How economic agents are constructed. Oxford: Oxford University Press.

    Google Scholar 

  • Maurer, B. (2012). Regulation as retrospective ethnography: Mobile money and the arts of cash. Banking and Finance Law Review, 27(2), 299.

    Google Scholar 

  • McGowan, M.J. (2010). "The rise of computerized high frequency trading: Use and controversy." Duke L. & Tech. Rev.

  • McKie, L & Ryan, L. eds. (2015). An end to the crisis of empirical sociology? trends and challenges in social research. Abingdon-on-Thames, UK: Routledge.

  • Mehrpouya, A., & Salles-Djelic, M. L. (2019). Seeing like the market; exploring the mutual rise of transparency and accounting in transnational economic and market governance. Accounting, Organizations and Society, 76, 12–31.

  • Mirowski, P., & Nik-Khah, E. (2017). The knowledge we have lost in information: The history of information in modern economics. Oxford: Oxford University Press.

  • Mohr, J. W., Wagner-Pacifici, R., Breiger, R., & Bogdanov, P. (2013). Graphing the grammar of motives in National Security Strategies: Cultural interpretation, automated text analysis and the drama of global politics. Poetics, 41(6), 670–700.

  • Muniesa, F. (2003). Des marchés comme algorithmes: sociologie de la cotation électronique à la Bourse de Paris. Doctoral dissertation. Paris: Ecole des Mines de Paris.

  • Muniesa, F., Millo, Y., & Callon, M. (2007). An introduction to market devices. The Sociological Review, 55(2), 1–12.

    Google Scholar 

  • O'Hara, M. (1995). Market microstructure theory. Cambridge: Blackwell Publishers.

    Google Scholar 

  • Onto, G. (2014). The market as lived experience: On the knowledge of markets in antitrust analysis. Vibrant: Virtual Brazilian Anthropology, 11(1), 159–190.

    Google Scholar 

  • Pardo-Guerra, J. P. (2010). Creating flows of interpersonal bits: The automation of the London stock exchange, c. 1955–90. Economy and Society, 39(1), 84–109.

    Google Scholar 

  • Pardo-Guerra, J. P. (2019). Automating finance: Infrastructures, engineers, and the making of electronic markets. Cambridge: Cambridge University Press.

    Google Scholar 

  • Pernell, K., Jung, J., & Dobbin, F. (2017). The hazards of expert control: Chief risk officers and risky derivatives. American Sociological Review, 82(3), 511–541.

    Google Scholar 

  • Perrow, C. (2011). Normal accidents: Living with high risk technologies-updated edition. Princeton: Princeton University Press.

    Google Scholar 

  • Pettigrew, A. M. (1979). On studying organizational cultures. Administrative Science Quarterly, 24(4), 570–581.

    Google Scholar 

  • Pistor, K. (2013). A legal theory of finance. Journal of Comparative Economics, 41(2), 315–330.

    Google Scholar 

  • Pistor, K. (2019). The code of capital: How the law creates wealth and inequality. Princeton: Princeton University Press.

  • Poli, R., Healy, M., & Kameas, A. (Eds.). (2010). Theory and applications of ontology: Computer applications. New York: Springer.

    Google Scholar 

  • Porter, T. (1996). Trust in numbers: The pursuit of objectivity in science and public life. Princeton: Princeton University Press.

    Google Scholar 

  • Porter, T. (2005). Private authority, technical authority, and the globalization of accounting standards. Business and Politics, 7(3), 1–30.

    Google Scholar 

  • Quinn, S. L. (2019). American bonds: How credit markets shaped a nation. Princeton: Princeton University Press.

    Google Scholar 

  • Riles, A. (2011). Collateral knowledge: Legal reasoning in the global financial markets. Chicago: University of Chicago Press.

    Google Scholar 

  • Roth, A. E. (2002). The economist as engineer: Game theory, experimentation, and computation as tools for design economics. Econometrica, 70(4), 1341–1378.

    Google Scholar 

  • Roth, A. E. (2008). What have we learned from market design? Innovations: Technology, Governance, Globalization, 3(1), 119–147.

    Google Scholar 

  • Rule, A., Cointet, J. P., & Bearman, P. S. (2015). Lexical shifts, substantive changes, and continuity in state of the union discourse, 1790-2014. Proceedings of the National Academy of Sciences, 112(35), 10837–10844.

    Google Scholar 

  • Schiller, D. (1982). Telematics and government. Santa Barbara: Greenwood Publishing Group.

    Google Scholar 

  • Seider, M. S. (1974). American big business ideology: A content analysis of executive speeches. American Sociological Review: 802–815.

  • Seligman, J. (1982). The transformation of wall street: A history of the securities and exchange commission and modern corporate finance. Boston: Houghton Mifflin.

    Google Scholar 

  • Slotten, H. R. (2000). Radio and television regulation: Broadcast technology in the United States, 1920–1960. Baltimore: Johns Hopkins University Press.

    Google Scholar 

  • Stehr, N. (2015). Knowledge politics: Governing the consequences of science and technology. London: Routledge.

    Google Scholar 

  • Vaughan, D. (1997). The challenger launch decision: Risky technology, culture, and deviance at NASA. Chicago: University of Chicago Press.

    Google Scholar 

  • Weeden, D. E. (2002). Weeden & Co: The New York stock exchange and the struggle over a national securities market. Weeden: Donald E.

  • Wells, W. (2000) "Certificates and computers: The remaking of Wall Street, 1967 to 1971." Business History Review 74, no. 2: 193–235.

  • Wiedemann, G. (2013). "Opening up to big data: Computer-assisted analysis of textual data in social sciences." Historical Social Research/Historische Sozialforschung: 332-357.

  • Wiener, J. B. (2004). The regulation of technology, and the technology of regulation. Technology in Society, 26(2–3), 483–500.

    Google Scholar 

  • Wilder, B. J. (Ed.). (2003). The Securities and Exchange Commission (SEC): Background, issues, bibliography. New York: Nova Science Pub Incorporated.

  • Williams, J. W. (2013). Regulatory technologies, risky subjects, and financial boundaries: Governing ‘fraud’ in the financial markets. Accounting, Organizations and Society, 38(6–7), 544–558.

  • Wilson, J. Q. (1980). The politics of regulation. New York: Basic Books.

  • Zaloom, C. (2006). Out of the pits: Traders and technology from Chicago to London. Chicago: University of Chicago Press.

Download references

Acknowledgments

I thank Bruce Carruthers and Stephen Craig Nelson for their always constructive advice, as well as the generous suggestions from audiences at the London School of Economics and Political Science, the University of Leicester, the University of California at Berkeley, and the 2015 Meeting of the Society for the Advancement of Socio-Economics.

Author information

Authors and Affiliations

  1. Department of Sociology, University of California, 9500 Gilman Dr. La Jolla, San Diego, CA, 92093, USA

    Juan Pablo Pardo-Guerra

Authors
  1. Juan Pablo Pardo-Guerra
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Juan Pablo Pardo-Guerra.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Pardo-Guerra, J.P. Where are the market devices? Exploring the links among regulation, markets, and technology at the securities and exchange commission, 1935–2010. Theor Soc 49, 245–276 (2020). https://doi.org/10.1007/s11186-020-09383-4

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11186-020-09383-4

Keywords

  • Computational triangulation
  • Finance
  • Financial regulation
  • Ontologies
  • Stock markets
  • Technology