The mirrored market: “GRS” illustrated
To begin with a concrete case, consider the foreign exchange market, which, with an average daily turnover of US$1.2 trillion in 2001, is the largest financial market and also the most global market (BIS 2001; for comprehensive descriptions of bond, stock and other financial markets see Abolafia 1996a, 1996b, 1998; Smith 1981, 1990, 1999; Hertz 1998).
Unlike other financial markets, the foreign exchange market is not organized mainly in centralized exchanges but derives from interdealer transactions in a global banking network of institutions; it is what is called an “over-the-counter” market. Over-the-counter transactions are made on the trading floors of major investment and other banks. On the major trading floors of the global banks where we conducted our research2 in Zurich and New York, between 200 (Zurich) and 800 (New York) traders were engaged in stock, bond, and currency trading involving various trading techniques and instruments. Smaller floors in Sydney, Zurich, and New York featured between 40 to 80 traders. Up to 20 per cent of these traders will deal in foreign exchange at desks grouped together on the floors. The traders on these desks in interbank currency markets are not brokers who mediate deals but rather market makers. They take their own “positions” in the market in trying to gain from price differences while also offering trades to other market participants, thereby bringing liquidity to the market and sustaining it - if necessary, by trading against their own position. Foreign exchange deals through these channels start in the order of several hundred thousand dollars per transaction, going up to a hundred million dollars and more. The deals are made by investors, speculators, financial managers, central bankers, and others who want to profit from expected currency moves, or who need currencies to help them enter or exit transnational investments (e.g. in mergers and acquisitions). In doing deals, all traders on the floors have a range of technology at their disposal; most conspicuously, up to five computer screens, which display the market and serve to conduct trading. When traders arrive in the morning they strap themselves to their seats, figuratively speaking, they bring up their screens, and from then on their eyes will be glued to these screens, their visual regard captured by it even when they talk or shout to each other, their bodies and the screen world melting together in what appears to be a total immersion in the action in which they areFrom pipes to scopes 125 taking part. The market composes itself in these produced-and-analysed displays to which traders are attached.
What do the screens show? The central feature of the screens and the centrepiece of the market for traders are the dealing prices displayed on the “electronic broker” (EBS), a special screen and automated dealing service that sorts orders according to best bids and offers. It displays prices for currency pairs (mainly dollars against other currencies such as the Swiss franc or the euro), deals being possible at these prices. Traders frequently deal through the electronic broker, which has largely replaced the “voice broker” (real-life broker); the price action there is also central to the prices they make, as “market makers”, for callers approaching them on the “Reuters conversational dealing”, another special screen (and computer network) through which they trade. On the Reuters dealing, deals are concluded in and through bilateral “conversations” conducted on screen. These resemble e-mail message exchanges for which the Reuters dealing is also used in and between dealing conversations. On a further screen, traders watch prices contributed by different banks worldwide; these prices are merely indicative, they express interest rather than being dealing prices as such. Traders may also watch their own current position in the market (e.g.
their being long or short on particular currencies), the history of deals made over recent periods, and their overall account balances (profits and losses over relevant periods) on this or another workstation at their disposal. Finally, the screens provide headline news, economic commentary, and interpretations which traders watch. An important source of information which also appears on these screens, but is closer to traders’ actual dealing in terms of the specificity, speed, and currentness of the information, are internal bulletin boards on which participants input information.Consider now the installation side of these trading floors. All financial markets today are heavily dependent on electronic information and communication technologies. Some markets, for example the foreign exchange market that is the focus of this work, are entirely electronic markets. As over-the-counter markets of interbank trading, currency markets rely on electronic technologies that enable the dealer-to-dealer contacts and trading services across borders and continents. Reuters, Bloomberg, and Telerate connections wire together these markets, as do intranets that internally connect the trading room terminals and other facilities of particular banks and groups of banks in global cities. Reuters, Bloomberg, and Telerate are news and service provider firms. In 2001, Reuters had more than 300,000 terminals installed worldwide in all markets and facilities and Bloomberg had more than 150,000. Revenue from leases of their systems amounted to approximately $2.5 billion each at the end of 2001.3 With the terminals comes sophisticated software: dealing and information systems, worksheet, e-mail and customization capabilities, electronic brokerage and accounting services, some of which - like EBS, the electronic broker system - have been developed by the banks themselves. The connections and the intricate and expensive hardware and software delivered by providers and the banking institutions themselves constitute the material infrastructure of financial markets.
How does this bear on the difference between a network form of coordination
and the reflexive, global form of coordination discussed in this chapter? First, it will be obvious from the description thus far that the material infrastructure of financial markets includes much more than electronic networks, the cable and satellite connections between banks and continents. It includes the installation of trading floors in the global cities that are the financial centres in the three major time zones: London, New York, Tokyo, Zurich, Singapore and a few others (see Sassen 2001: Ch.7; Leyshon and Thrift 1997). The trading floors are the bridgehead centres for a global market that moves from time zone to time zone with the sun. The centrepieces of the interconnected floors are their federations of terminals that feature the sophisticated hardware and software capabilities discussed. When talking about the electronic infrastructure of financial markets, we should not lose sight of the hardware and software of the trading floors themselves and the terminal structures that “ready” these floors for trading. Second, the electronic interconnections which are part of this federation and link all participating institutions, including the service provider firms, are not simply coextensive with social networks through which transactions flow. As electronic networks they correspond to different construction criteria, involve electronic nodes and linkages irrelevant to social relationships, and what flows through them frequently does not derive from social and financial relationships; an example are EBS deals, which are traders’ responses to anonymous buying or selling offers provided by an automated electronic broker system. Third and most important, the terminals deliver much more thanjust windows to physically distant counterparties. In fact, they deliver the reality of financial markets - the referential whole to which “being in the market” refers, the ground on which traders step as they make their moves, the world which they literally share through their shared technologies and systems.
The thickly-layered screens laid out in front of traders provide the core of the market and most of the context. They come as close as one can get to delivering a stand-alone world that includes “everything” (see below) for its existence and continuation: at the centre the actual dealing prices and incoming trading conversations, in a second circle the indicative prices, account information and some news (depending on the current market story), and further headlines and commentaries providing a third layer of information. It is this delivery of a world assembled and drawn together in ways that make sense and allow navigation and accounting which suggests the globally reflexive character of this form of coordination - and the scopic nature of traders’ screens. The dealing and information systems on screen visually “collect” and present the market to all participants.Two aspects of the system need to be emphasized. One is that the GRS in currency markets assembles not only relevant information about, for example, political events, economic developments, and prices, but “gathers up” the activities themselves - it affords the possibility of performing the market transactions and other interactions through its technological and software capabilities. In other words, the system is reflexive and performative. In fact, it not only affords these possibilities as an option but has drawn market activities in completely. With the exception perhaps of situations where there has been an electronic breakdown, when traders may resort to dealing via the telephone, nearly all dealing transactions - trades of
From pipes to scopes 127 financial instruments - and other interactions are performed on computer screens. This system effectively eliminates the pre-reflexive reality by integrating within its framework all relevant venues of the specialized lifeworld of financial markets. The reality on screen becomes the traders’ lifeworld, a lifeworld that is at the same time reflexively transmitted and instantaneously projected.
It also offers, beside anonymous venues of trading through the electronic broker, relational dealing systems - e.g. the previously mentioned Reuters conversational dealing, where one trader contacts another and deals with him or her in what natives call a “dealing conversation”. This window can also be used for conversing with a financial market friend connected to the system about anything of mutual interest; for example, it is used extensively for soliciting and offering and co-analysing information. In sum, the global reflex system of financial screens integrates within its framework the conduits for building and maintaining relationships. Should we therefore conclude that this global reflex system is nothing more than an electronic facilitating device for markets that run through networks? Surely not. Roughly 80 per cent of trades, if not more, according to traders’ estimates, are conducted through the electronic broker, which is an anonymous dealing system, as indicated. Even if some of these deals involve parties with whom one entertains a business (or personal) relationship, these relationships remain interactionally irrelevant since the dealoffering parties are not disclosed in advance on the EBS. Among the at most 20 per cent of the trades conducted through conversational dealing systems, relationship deals are more likely, but they need not be dominant. Any bank accredited for certain dealing limits and electronically connected to the system can approach any other bank through the conversational dealing without a pre-existing or ongoing relationship. Traders also differentiate between “their networks” of contacts, those dealers and clients with whom they interact frequently and consider a subset of the market; their circle of closer “friends” comprising perhaps up to 5 or 10 people with whom they talk almost daily and sometimes extensively via the conversational dealing system and the telephone; and the market, which has a large anonymous component. As one trader put it, “(the market on screen) is probably like 99.99999 per cent anonymous”.The second aspect to be emphasized follows from the description thus far. The mirrored market that is comprehensively projected on computer screens acquires a presence and profile of its own, with its own temporal and other properties. Traders are not simply confronted with a medium of communication through which bilateral transactions are conducted, the sort of thing the telephone stands for. They are confronted with a market that has become a “life form” in its own right, a “greater being”, as one of our respondents, a proprietary trader in Zurich, put it - a being that is sometimes coherent but at other times dispersed and fragmented.
LG: You know it’s an invisible hand, the market is always right, it’s a life form that has being in its own right. You know, in a sort of Gestalt sort of way... it has form and meaning.
KK: It has form and meaning which is independent of you? You can’t control it, is that the point?
LG: Right. Exactly, exactly!
KK: Most of the time it’s quite dispersed, or does it gel for you?
LG: A-h, that’s why I say it has life, it has life in and of itself, you know, sometimes it all comes together, and sometimes it’s all just sort of, dispersed, and arbitrary, and random, and directionless and lacking cohesiveness.
KK: But you see it as a third thing? Or do you mean the other person?
LG: As a greater being.
KK:...
LG: No, I don’t mean the other person; I mean the being as a whole. And the being is the foreign exchange market - and we are a sum of our parts, or it is a sum of its parts.
The following quote also gives an inclusive definition of the market which brings out its life-like depth. The territorial disputes between economics, sociology, and psychology over market definitions all melt into a sort of “markets are everything” in which the focus can shift from aspect to aspect.
KK: What is the market for you, is it the price action, or is it individual participants, or?
RG: Everything. Everything.
KK: Everything? The information?
RG: Everything. Everything. How loudly he’s screaming, how excited he gets, who’s selling, who’s buying, where, which centre, what central banks are doing, what the large funds are doing, what the press is saying, what’s happening to the CDU [a political party in Germany], what the Malaysian prime minister is saying, it’s everything - everything all the time.
Who the buyers and sellers are, what significant actors and observers both in the market and outside it do and say, all the agents, activities, and contextual events indicated in this quote and the reactions of market observers and participants to these events represent the market. The quote comes from an experienced trader who had worked in several countries, including ones in the Far East, before coming to Zurich. Note that his “the market is everything” refers to the manifold things that one finds on financial screens, the news and news commentary, the confidential information about what some major players are doing, and the prices. The screens, or perhaps we should say the availability of a projection plane for financial markets, appear to have enlarged rather than reduced the world of this market. It has undeniably enlarged the world beyond that which ordinarily flows through trading networks, which, as we shall see in the next section, historically was to a large extent price information.
The notion of a network draws on a powerful convergence of organizational changes, technological developments, and broader cultural transformations of values which sustain the network not only as an analytic concept for the investigation
From pipes to scopes 129 of social structure, but also as a model and advertisement for how things in many areas should be structured. The most important convergent development that has contributed to the recent renaissance of network concepts is surely that of information and communication technologies which are based on electronic linkages between geographic areas and are referred to in terms of a vocabulary of nets, webs, circuits, and nodes. Information and communication technologies have made the network notion salient, strengthened pre-existing trends toward network forms of organization, and facilitated some of these developments. Castells accordingly writes of the network society where “flows of messages and images between networks constitute the basic thread of our social structure” (Castells 1996: 476-7; compare Lash 2002). He sees dominant societal functions organized in global information technology networks linked by these communications, while subordinate functions fragment in local settings where people occupied with these functions become increasingly segregated and disconnected from each other. But the central question for social scientists is how these technologies are instantiated in concrete areas of practice, and here a different picture emerges. From the traders’ perspective, and from the perspective of the observer of traders’ lifeworld, the dominant element in the installation of trading floors in globally interconnected financial institutions is not the electronic infrastructural connections - the “pipes” (Podolny 2001: 33) or arteries through which transactions flow - but the computer screens and the dealing and information capabilities which instantly reflect, project, and extend the reality of these markets in toto. They give rise to a form of coordination that includes networks but also vastly transcends them, projecting an aggregate and contextualized market. The screens on which the market is present are identically replicated in all institutions and on all trading floors, forming, as it were, one huge compound mirroring and transaction device to which many contribute and on which all draw As an omnipresent complex “Other”, the market on screen takes on a presence and profile in its own right with its own self-assembling and self-integrating features (for example, the best prices world-wide are selected and displayed), its own calculating routines (for example, accounts are maintained and prices may be calculated), and self-historicizing properties (for example, price histories are displayed and a multiplicity of other histories can be called up). The electronic programs and circuits which underlie this screen world assemble and implement on one platform the previously dispersed activities of different agents; of brokers and bookkeepers, of market-makers (traders) and analysts, of researchers and news agents. In this sense, the screen is a building site on which a whole economic and epistemological world is erected. It is not simply a “medium” for the transmission of pre-reflexive interactions.