Search Results

Chapter 1 examines the development of retail trading from the 1960s until our days, paying special attention both to the technological developments that marked the transition to electronic trading in the mid to late 1990s and to the place of retail brokerages within the institutional structure of financial markets. The focus is on the United States and the United Kingdom. Three kinds of processes are investigated close up: the evolution and diversification of retail brokerages in relationship to trading technologies; regulatory regimes and changes in these regimes; the evolution of the client structure of retail brokerages in relationship to online trading. In the 1980s retail brokerages adopted technological innovations meant to increase the frequency with which their customer base was trading. This trend continued in the 1990s, when online platforms for retail traders emerged. The creation of financial products tailored to retail traders and to more frequent trading was accompanied by a regulatory regime that also encouraged trading frequently (e.g., via a favorable taxation regime and high leverage). Between 2000 and 2010, the demographic structure of retail trading populations began to shift toward younger age groups, while income spreads grew larger.

By the 1990s the pressures on traditional stock exchanges were so intense that inertia was no longer an option. These pressures included the globalization of investment, deregulation, dismantling of capital controls, cheap and rapid communication, and powerful computing, The effect was to undermine the grip that exchanges had once exerted over national stock markets. No longer were the members of exchanges the filter through which buying and selling passed because of the control they exercised over access to both information and the market. Alternative means of trading stocks were proliferating, undermining and then destroying the exclusive privileges long enjoyed by those belonging to stock exchanges. Leading this attack on the power of stock exchanges were the megabanks. As these banks grew in scale and scope, extending their activities around the globe, they were either able to internalize many transactions or trade between themselves. In the process they cut out the exchanges, bypassing, and the charges and restrictions they imposed. There had long been an ambiguous relationship between banks and exchanges, as they were both rivals and heavy users. The combination of the megabanks, interdealer brokers, and electronic markets was rendering exchanges redundant in the 1990s, forcing them to respond through diversification and mergers.

This chapter examines the act of online trading itself—what it means, from the viewpoint of the trader, to use an online technology to conduct financial transactions. It analyzes what happens when traders place orders on their screens, how orders are handled within the infrastructure of electronic brokerages, and how traders perceive and make sense of their activities. While the orders placed by traders are not always matched against each other, the trading screen is geared toward producing a necessary illusion of relationality—that is, of traders relating to other traders. The chapter examines the types of actions that constitute trading and the ways in which they are shaped by the inherent relationality of the trading screen. Anchored in ethnographic observations, it investigates how various experiences of using the trading screen are articulated and how social hierarchies are produced in this process. Many ethnographies of financial trading have seen it as an egalitarian environment, where traders differ from each other based only on their skills. This chapter investigates how particular forms of trading are not egalitarian at all, but express in their setup hierarchical differences between retail traders, on the one hand, and traders claiming superior status, on the other.