Monday, December 7, 2-3:30pm in 402 Barrows
Evaluation Cultures, Organizational Logics, and the Limits of Financial Regulation
On 15 January 2015, the Securities and Exchange Commission settled a case against UBS, the global investment bank, for practices associated with the operation of its 'dark pool', a private electronic trading venue designed to give certain users an illegal competitive advantage over the general marketplace. As the SEC noted, UBS's dark pool contemplated a type of hidden order that, privy to only a small group of sophisticated investors, allowed outbidding regular users of the trading system’s order book. Notably, it took the SEC six years to act on UBS's dark pool, despite the fact that it was developed in one of the most intensely disclosed marketplaces in the world. Why did the SEC fail to act on such critical issues of market structure? This paper addresses the regulatory practices of the Securities and Exchange Commission over the course of the twentieth century. Using computer-aided text analyses of 7500 speeches by the SEC’s commissioners (including the evolution of ngrams, topic models and semantic networks within the corpus), this paper identifies distinct textual patterns that are used to chart the changing institutional cultures of evaluation at the SEC and its approach to controversies about the architecture of American finance. Combined with data on the professional backgrounds of SEC commissioners, oral histories, published institutional histories, and congressional debates on financial regulation, I show that the dominance of cultural evaluation frameworks and professional backgrounds within economics, law, and accounting hindered the ability of the SEC to act in regulating highly technical controversies of market structure and market technology. While such evaluation culture spoke to the SEC’s New Deal origins, it became an obstacle in resolving technical controversies about the politics of fairness and equality in American finance.
Juan Pablo Pardo-Guerra studied physics (UNAM) and science and technology studies (University of Edinburgh) and joined the Department of Sociology of the University of California, San Diego, in 2015. He studies the automation of financial markets and is currently working on a book entitled The Orders of Finance that explores how technology, morality and politics shaped modern stock markets.