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Impersonal efficiency and the dangers of a fully automated securities exchange

Pardo-Guerra, Juan Pablo, Beunza, Daniel, Millo, Yuval and MacKenzie, Donald (2010) Impersonal efficiency and the dangers of a fully automated securities exchange. Foresight driver review, DR11. Foresight, London, UK.

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Abstract

This report identifies impersonal efficiency as a driver of market automation during the past four decades, and speculates about the future problems it might pose. The ideology of impersonal efficiency is rooted in a mistrust of financial intermediaries such as floor brokers and specialists. Impersonal efficiency has guided the development of market automation towards transparency and impersonality, at the expense of human trading floors. The result has been an erosion of the informal norms and human judgment that characterize less anonymous markets. We call impersonal efficiency an ideology because we do not think that impersonal markets are always superior to markets built on social ties. This report traces the historical origins of this ideology, considers the problems it has already created in the recent Flash Crash of 2010, and asks what potential risks it might pose in the future.

Item Type: Monograph (Project Report)
Official URL: http://www.bis.gov.uk/foresight/our-work/projects/...
Additional Information: © 2010 Crown copyright
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HM Sociology
T Technology > T Technology (General)
Journal of Economic Literature Classification System: Z - Other Special Topics > Z1 - Cultural Economics; Economic Sociology; Economic Anthropology
Sets: Departments > Accounting
Departments > Management
Departments > Sociology
Research centres and groups > Employment Relations and Organisational Behaviour Group
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: DR11
Date Deposited: 15 Jun 2012 10:54
URL: http://eprints.lse.ac.uk/43589/

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