Modern stock exchanges couldn’t exist without wires. They are virtual, global, infinitely expanding. Their trading floors are humming servers. But no one ever planned this transformation, and it took many by surprise. This episode explores the long processes of automation throughout the second half of the twentieth century. We hear about engineers, screens, and how technology created a new stock exchange almost by accident.

Transcription

Let’s take a walk through a stock exchange. In the 1980s, it would have sounded like this…

—– trading pit —–[1]

That’s a trading pit, with the bell sounding, bodies crammed together, pushing, shouting. We have heard it a few times by now. In the late 1980s, when Tom Wolfe visited the trading room of Pierce & Pierce, he still found a terrible noise, ‘an ungodly roar, like the roar of a mob…an oppressive space with a ferocious glare, writhing silhouettes…moving about in an agitated manner and sweating early in the morning and shouting, which created the roar. It was’, he writes, ‘the sound of well-educated young white men baying for money on the bond market.’ But the market is only partly in this trading room, it is outside, absent, on the screens. And if you walk through a stock exchange today, it would sound like this…

——– ‘singing servers’—–[2]

Isn’t that eerie? The sound of servers in a data centre, chattering to one another. A beautiful recording, too. These changing sounds are the background to the story in today’s episode, that of automation, the transformation from spoken markets to those of near instantaneous speed, a transformation that has made possible an increase in the volume and scale of financial transactions to a level that would have been simply inconceivable 30 years ago. Economists delight in pointing out how technological improvements in financial markets lead to socially beneficial outcomes through facilitating liquidity and choice. That argument, however, supposes that changing the medium of trade has no consequences other than making it easier. By now, we know this cannot be the case: throughout the first part of this podcast we have seen how the shape, function and purpose of financial markets are every bit as dependent upon their material structures as on regulatory regimes and global political-economic conditions. Through the 1980s and 1990s, automation turned stock exchanges inside out. That is today’s story – even if we don’t make it all the way into the cloud in one episode.

Hello, and welcome to How to Build a Stock Exchange. My name is Philip Roscoe, and I teach and research at the University of St Andrews in Scotland. I am a sociologist interested in the world of finance and I want to build a stock exchange. Why? Because, when it comes to finance, what we have just isn’t good enough. To build something – to make something better – you need to understand how it works. Sometimes that means taking it to pieces, and that’s exactly what we’ll be doing in this podcast. I’ll be asking: what makes financial markets work? What is in a price, and why does it matter? How did finance become so important? And who invented unicorns?

The last two episodes have focused on the upheavals felt in the world of finance during the 1980s, the decade when greed became good. We saw, in episode six, how shifts in the tectonic plates of global economic governance and the intellectual fashions around ownership and collective versus individual responsibility had led to the birth of a new kind of social contract, the individualism of Thatcherism and Reaganomics. We saw how – in the UK at least – that manifested itself in a new kind of investor, Sid, the archetypal blue-collar worker turned property owner who bought into the newly privatised industries and could consider himself a member of the rentier classes.