Call for papers and open registration (deadline: July 15th):

The Sociology of Market Microstructure

A Workshop at the New York Stock Exchange

Daniel Beunza and Yuval Millo (organizers)

August 9th 2013, 9.00 am – 5.30 pm

In the past three decades economic sociologists have developed a distinct understanding of financial exchanges, yet the current trend towards automation and ongoing regulatory debate over high frequency trading have called for renewed research on the topic. This workshop aims at putting together a coherent body of sociological research focused on financial exchanges and related issues — the automation of trading, high frequency trading, financial regulation, the Flash Crash, the European MiFID directive, etc.– with the goal of developing a sociological literature in the area known as “market microstructure” in economics. Appropriately, the event will take place within the New York Stock Exchange, and include tours of the floor in small groups. Confirmed speakers include Daniel Beunza, Bruce Carruthers, Donald MacKenzie, Karin Knorr Cetina, Juan Pablo Pardo-Guerra, Aaron Pitluck, Yuval Millo, and others.

We are inviting proposals for paper presentations. Registration to attend is now open for participants. Places will be limited to 50, including the panelists and will be allocated on a first-come first-serve basis. Registration is free, but we expect a firm commitment. For inquiries please contact Daniel Beunza and d.beunza@lse.ac.uk or Yuval Millo at ym95@leicester.ac.uk

 

Attention to high-frequency trading has been triggered by two events: the first, a case brought against a former Goldman Sachs programmer who allegedly stole secret computer code that could be used to “manipulate the markets in unfair ways”; the second, Goldman Sachs’ impressive returns despite the recent turmoil in the investment banking sector.

High frequency trading occurs when software is used to make millions of millions of trades at a millisecond pace.  What is remarkable is how quickly it happens and how quickly strategies can be adapted.  Attacks and counter attacks are launched within a second. The trades are so fast that materiality matters. ‘Co-location’, which  involves situating the trading room next to the exchange so that the wires and cables running between them are as short as possible, actually confers an advantage to high frequency traders.

The exchanges are in competition to attract high frequency traders and the fees these transactions generate.  Abated and encouraged by the exchanges high frequency trading has changed the nature of the markets, putting smaller players like mom and pop day-traders, at a distinct disadvantage.  According to a NYTimes report, using the case of Broadcom as an example, “The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.”