“Melting the Iceberg” + “Describing Objects” + … = “Unveiling the Dark Side of Markets”?

May 8, 2010

The week’s regulatory chronicle has been punctuated, in Paris, with a thoughtful sentence pronounced by M. Jouyet, the President of the Autorité des Marchés Financiers. Addressing the Committee of European Affairs of the French Parliament last Tuesday, M. Jouyet began his speech with the following statement: “Where is the financial Europe? What is a European market? These are the main political questions faced by regulators” (the whole discourse is available here). Acknowledging so bluntly that the definition of markets may in fact be the big issue offers (at last…) a space for discussion. Although not referring explicitly to anthropology, which would certainly have made the official discourse sound like black magic to parliamentarians, the point may well validate a view differently expressed by Gillian Tett (here) and Fabian Muniesa (here): the idea that market representations and the way they are formed do count when depicting market realities. We’d like to add a consideration to this proposal and suggest that unveiling the dark side of markets (the unseen, the undefined, the underlying) might require a further displacement of the focal generally used to scrutinize these bizarre entities.

Cognitive icebergs and comprehensive descriptions

Whatever the difficulty may be, depicting financial markets remains a definitive task especially in times of crisis, as Tett (2009: 6) notes in her short focus, suggesting that the cognitive mapping of the financial system six years ago would have looked “like an ‘iceberg’ in media terms”, with “a large chunk of activity […] submerged from sight”, and ignored by lack of writing in the press or elsewhere. This icy metaphor definitely prompt us at looking under the surface of the financial landscape, in order to find ways to describe what really lies under expressions such as “liquid order books”, “transparent price disclosure mechanisms”, “best execution policies”, “market abusive practices”, etc. All indicate the devices making the financial sphere hold in itself, and contribute to the enacting of the market materiality. Melting the iceberg and describing this specific ecology (or, better said in the current state of crisis, its etiology), requires that we find a way to unfold the glossy images and concepts generated and constantly renewed by finance.

On his side, Fabian Muniesa recalls us how financial objects (and here we would think more broadly of market participants, in order to encompass humans, objects and institutions altogether) “are difficult to describe, difficult to account for or to understand, sometimes even for those involved in the financial services industry”. Ascribing a reality while describing an object, in order to articulate a discourse on finance definitely requires some kind of engagement, and perhaps even a bit more, as Charles W. Smith proposed a few years ago (here).

Contextualizing finance, working on descriptions: a precipitation process?

Both approaches somehow converge in the idea that agencies taking place within the practices of everyday finance – whether observed in a trading room, an M&A department or a retail banking agency – have not yet been thoroughly integrated in the academic discourse. But how can we achieve such an unveiling of intricate agencies, in order to understand what they produce, and how they organize? Our suggestion is that we need further works on market contexts and the related temporality regimes.

Market contexts can in fact be seen as the precipitation (in the chemical sense of the term) or actualization of entities pertaining to the market: such entities could be recognized as diverse participants answering to different ontological regimes, whether humans or non-humans, material or non-material. What do these entities participating to the market have in common? They can be described as “share-holders” of a space where they deploy and hold together during a certain period of time, in a certain place which topography helps the identification. During the precipitation process, entities attach, detach or stabilize in the given environment, the time span during which they materialize a story and crystallize a plot helping to determine when the given situation begins, and when it comes to an end. This, once accounted for, could be referred to as the market context connecting participants, meeting in the course of the same event. Trading rooms, for example, offer spaces where interactions between participants (analysts, sales traders, back-office clerks, cables and computers, norms and rules, etc.) constantly articulate and express market events. Like in the precipitation process, some elements may not attach to the main frame, while others would get stronger as time passes, during the process where an event happens and crystallizes (a client may ask for something, the sales would not know the rule to follow or have an IT issue and need to speak with his compliance officer in order to validate the considered practice; when returning back to the client, the sales would then notice that the client has left, and “the market” as well).

Working on these market contexts, which offer micro-sociological insights, provides a direct phenomenological access to the very making of finance through the confrontations that frame markets. In this respect, market contexts literally represent the market: they speak in the name of markets, and account for them. It is their succession that gives the market its own reality, its flesh and its very specific embodiment. Like in chemistry, elements (participants) order themselves as atomistic entities, build connexions (strong or weak), and sometimes generate energy (the trader shouting the order while his computer refuses to process it). In the process, some actants may take advantage and decide to act or react, and contribute to the production of a further stage in the situation. When this happens, the market context acquires its ontological thickness, requiring further layers of descriptions, overflowing the ones previously produced.

If the question really is about the description of markets (and the official position seems to encourage us in this direction), then restoring the link between participants through the hermeneutic of market contexts and the accounting of their specific temporality regimes is a task that needs to be fulfilled by social studies of finance. Working on the intricacies resulting from confronting temporalities, describing what takes place in these time spans where the market reality is literally made as a whole could probably help our understanding of such odd places. There obviously is a momentum for research here.

9 Responses to ““Melting the Iceberg” + “Describing Objects” + … = “Unveiling the Dark Side of Markets”?”

  1. danielbeunza Says:

    Marc — very interesting. Gillian Tett’s call for “melting the iceberg” is a very powerful one. I agree that describing the settings where financial transactions take place (“market contexts”) can give the rest of society a sense of where things are happening.

    But if we take the recent market panic as an example, it is interesting that the only representation we have seen in the media is that of the floor of the NYSE — whereas the problem is purported to be virtual, in high-frequency trading. What the market needs now, I would argue, is powerful visualizations that shed light on this new “iceberg”.

    For example, here’s an exhibition on ten ways to represent the financial markets that I co-curated with two Spanish artists:


  2. marclenglet Says:

    Well, one of the underlying reasons for turning to the description of contexts is that I find research soemtimes a bit frustrating on this specific aspect (of course, it is both time consuming to observe and difficult to resituate contexts in the space provided by a normal article…).
    Besides, it is with regard to the context that regulation can take place (I speak here with reference to the practice of compliance functions): the vast majority of situations faced by practitioners are not described / accounted for even in regulatory texts. The significance of the practice can move and change from an extreme to another quite rapidly, when contexts are modified, and this happens in multiple ways, where the setting of situations evolve in a reduced time span. Hence the chemical metaphor which may be worth pursuing.
    Your comment on last week’s frenzied activity is certainly showing that it is rather difficult to explain what an algorithm is, what it does, etc. There is a place here for descriptions, and the construction of algorithms as financial objects (F. Muniesa) doing (odd) things in given contexts that have not been taken into account by our common representations.

  3. marthapoon Says:

    Marc – if what you are pursuing descriptively is to be called the ‘market context’, then I am wondering what/where the ‘content’ of the market is, and whether it can also be described… Martha

  4. mlenglet Says:

    Martha – this is a very good point you make here, which may help me precise what I tried to express with this precipitation metaphor. I think that looking more deeply into the contexts where financial practices are made, may in the end help us construct a genuine political anthropology of finance (with reference, for example, to Horacio Ortiz’s work).

    Turning our lenses towards the contexts that are fixed, set or materialized when market participants confront and precipitate altogether (ie. arrange themselves, or get rearranged by forces they sometimes cannot manage – even though they contribute to their enactment) for a given period of time, provides our descriptions of financial objects with a further layer of significance.

    Because contexts are very difficult to account for (you need to be there when things happen and make people speak about it), they usually are not fully used or comprehensively resituated, even in very good ethnographic accounts.

    To me, there is no disjunction between contexts and contents, rather an internal play between these, which development through time literally makes the market.

  5. danielbeunza Says:

    Marc and Martha — here’s a possible take on “context,” from yesterday’s Financial Times:

    “Thomson Reuters, the financial information company, will launch tomorrow a video platform for hedge funds, traders, research analysts, banks and brokers to communicate with clients – a form of “YouTube” for the financial industry (…) The move marks a recognition that the trading community is increasingly relying on video, often with data and charts embedded in it, to drive trading decisions. It will take the video and online social networking revolution into the financial sector”


    The proliferation of videos introduces unprecedented possibilities for theater, drama and performance in the market. Many commentators, for instance, blame the demise of Bear Stearns to a bad interview on CNBC by its CEO. Blurring even more the distinction between substance and style, or context and content.

  6. mlenglet Says:

    Very nice initiative and example… which will however generate intricate problems, questions and reflections (not even speaking about compliance issues)

    Let’s see how the algos will be able to “read” and “interpret” these depictions of market contexts in the near future…

    • Juan Pablo Says:

      The algos, I suspect, will start experimenting with ontology-based and semantic processing systems. As far as I understand, algorithmic trading is based mostly on identifying statistical signals through data mining or using the architecture of the network to find/create opportunities in the market (e.g. flash orders). However, I remember seeing some research into semantic data mining of the internet to design long-term portfolios; quite interesting, and perhaps an indication of the shape taken by the cybernetic systems of the markets of the future.

  7. marclenglet Says:

    Juan Pablo – One of the main questions for future developments in markets is the dilution of the practice of trading within tools such as algorithms. At least, it sometimes puzzles compliance officers and regulators…
    Algos may take several different shapes, and process several different kind of operations. From a sociohistorical perspective, the shift from a market matching algorithm (serving as an example in Muniesa’s PhD) to a landscape where algo traders tend to make the market happen as it is, raises questions that have not been yet fully answered. Here, an interesting reference to me is Leinweber”s “Nerds on Wall Street” (2009).

  8. super Says:

    more on http://financemarket.iblogger.org free back links and finance markets news

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