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Organised detachment: clearinghouse mechanisms in financial markets

Millo, Yuval, Muniesa, Fabian, Panourgias, Nikiforos S. and Scott, S.V. (2005) Organised detachment: clearinghouse mechanisms in financial markets. Information and Organization, 15 (3). pp. 229-246. ISSN 1471-7727

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Abstract

Bringing transactions to an end constitutes a crucial stage of market activity: the detachment between the counterparties engaged in a trade must be guaranteed. In financial markets, this operation relies on organisational technologies, such as clearinghouses, that can reach a high degree of sophistication. In this paper, we use financial clearinghouse mechanisms to explore how such detachment technologies are constructed. Based on several historical examples, our review shows that clearinghouse mechanisms developed on the basis of an increasingly IT-enabled organisational separation between the trading and clearing stages of market activity were a crucial factor that enabled clearinghouses to calculate the mutual obligations of the counterparties and perform the consequential steps. Our analysis goes on to reveal a paradoxical thread in the evolution of clearing: increasing informational and calculative capacity have lead clearing mechanisms to breach the separation on which their ability to operate was dependent – the boundary between trading activity and clearing processes. These findings shed a new light on the reflexive nature of IT-enabled market innovations and emphasise their role in re-introducing new forms of disorganisation back into contemporary financial markets.

Item Type: Article
Official URL: http://www.elsevier.com/wps/find/journaldescriptio...
Additional Information: © 2005 Elsevier
Library of Congress subject classification: H Social Sciences > HG Finance
Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Sets: Research centres and groups > Information Systems and Innovation Group
Departments > Management
Research centres and groups > Centre for Economic Performance (CEP)
Research centres and groups > Centre for Analysis of Risk and Regulation (CARR)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 05 Jun 2007
URL: http://eprints.lse.ac.uk/2382/

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