The Government of Markets (eBook)

How Interwar Collaborations between the CBOT and the State Created Modern Futures Trading

Rasheed Saleuddin (Autor)

eBook Download: PDF

2018 | 1st ed. 2018
XIX, 321 Seiten
Springer International Publishing (Verlag)
978-3-319-93184-5 (ISBN)

Infos

Absent evidence to the contrary, it is usually assumed that US financial markets developed in spite of government attempts to regulate, and therefore laissez faire is the best approach for developing critically important and enduring market institutions. This book makes heavy use of extensive archival sources that are no longer publicly available to describe in detail the discussions inside the CBOT and the often private and confidential negotiations between industry leaders and government officials. This work suggests that, contrary to the accepted story, what we now know of as modern futures markets were heavily co-constructed through a meaningful long-term collaboration between a progressive CBOT leadership and an extremely knowledgeable and pragmatic US federal government. The industry leaders had a difficult time evolving the modern institutions in the face of powerful reactionary internal forces. Yet in the end the CBOT, by co-opting and cooperating with federal officials, led the exchange and Chicago markets in general to a near century of global dominance. On the federal government side, knowledgeable technocrats and inspired politicians led an information and analysis explosion while interacting with industry, both formally and informally, to craft better markets for all.

Rasheed Saleuddin is an author and researcher at the Cambridge Centre for Alternative Finance and an experienced investor and advisor. He previously spent ten years at Canadian hedge fund West Face Capital. He holds a PhD in history from Cambridge, U.K., and an MSc in regulation from the LSE, U.K. He has one book, Regulation of Securitized Products, published in 2015 by Palgrave Macmillan, and is currently involved in a new project on the history of private currencies. 

Inhalt

Acknowledgements 7
Contents 9
Abbreviations 10
List of Figures 11
List of Tables 12
The Cast of Characters 13
Chapter 1 Introduction: The Interwar Coming of Age of Modern Futures Markets, Institutions and Governance 16
1.1 Rhetoric over Policy Substance, in 1922 20
1.2 The CBOT Experience as a Case of Market Regulation 22
1.3 The Themes of This Book 25
1.3.1 Private Versus Public Evidence 25
1.3.2 Public and Private Sectors in Partnership 30
1.3.3 The Role of Transparency and Intellectual Study in Optimal Markets Design 33
1.3.4 Policy and Industry Entrepreneurs 35
1.4 Wheat, Futures and the Chicago Board of Trade 38
1.5 Markets Today 47
1.6 The CME Group Archive 50
1.7 Conclusions 51
1.8 Outline of the Book 54
1.9 The Coming of Age of Modern Markets 58
Bibliography 60
Chapter 2 The Wild Midwest 65
2.1 Chaos upon the Reopening of the Markets in 1920 66
2.2 Governance at the Chicago Board of Trade After World War I 68
2.3 The Dawn of Federal Regulation 72
2.4 The Issues of 1920 76
2.4.1 Manipulation at the Board 77
2.4.2 Defending the Monopoly 80
2.4.3 The CBOT in Washington 81
2.4.4 The Bucket Shops 83
2.4.5 State Legislative Threats and the Fight for Legal Legitimacy 87
2.4.6 The Cooperative Threat 89
2.5 The Information Deficit 94
2.6 Towards a Legislative Solution 98
Bibliography 98
Chapter 3 The Grain Futures Act of 1922 and the Dominance of the CBOT 101
3.1 Introduction 101
3.2 The Forgotten Depression of 1921 105
3.2.1 Legislation Threatens 107
3.2.2 Senator Capper and the Capper-Tincher Bill 110
3.3 The Futures Trading Act 112
3.3.1 The Private Wire Question 114
3.3.2 The CBOT, Lobbying and the Cooperative Clause 118
3.3.3 The Public Record 125
3.3.4 The Private Record 127
3.3.5 The Constitutional Challenge in a New Light 130
3.4 The Grain Futures Act 133
3.4.1 Interstate Commerce 133
3.4.2 Section 5(f) Removed 135
3.4.3 The Second Legal Challenge 135
3.5 The Substance of the Grain Futures Act 138
3.5.1 Legal Legitimacy 141
3.5.2 Monopoly 145
3.5.3 Market Data Reporting and Information Gathering 146
3.6 Explaining the Legislation 150
3.6.1 Agrarian Populism 150
3.6.2 A Better Explanation 154
3.7 Conclusions 158
Bibliography 159
Chapter 4 The Co-construction of Modern Futures Markets, 1923–1926 163
4.1 The Co-governance of the Futures Markets 163
4.2 Explaining the Gap in Regulation Between 1924 and 1935 167
4.2.1 Cooperatives and Parity Pricing 168
4.2.2 Taking the Time to Investigate the Markets 169
4.2.3 The CBOT Lobby 170
4.2.4 Ideological Bias Against New Legislation 175
4.3 Information Gathering at the Grain Futures Administration 176
4.3.1 The 1923 Rules and Regulations 177
4.3.2 Inspections 183
4.3.3 Governance by Threats Rather Than Laws 187
4.3.4 Information as Goal and Outcome 188
4.4 The Cutten Corner, 1924–1925 193
4.4.1 Fluctuations in Wheat Futures 196
4.5 The Fight for Modern Clearing 199
4.5.1 A Collective Action Problem at the CBOT 199
4.5.2 Modern Clearing 201
4.5.3 The Road to Modern Clearing 208
4.5.4 The Private Arrangement 210
4.6 Business Conduct Committees 214
4.6.1 Towards Co-regulation 214
4.6.2 Cooperation in Committee 223
4.7 Voting by Proxy 225
4.8 Strained Relations Begin 225
4.9 Conclusion 227
Bibliography 231
Chapter 5 Legitimising the Grain Gambler and the Commodity Exchange Act of 1936 234
5.1 From Gambling Den to ‘Necessary’ Institution in the Public Interest 234
5.2 Conflicting Interests: The CBOT, the GFA and the AFBF 238
5.2.1 A Coalition Formed 240
5.2.2 The CBOT and the GFA, 1926–1936 244
5.3 Evidence on Speculation, 1926–1936 250
5.3.1 Transcending Ignorance and Rhetoric 251
5.3.2 Information Used Against the CBOT Lobby 258
5.4 Post-crash Government Interventions 261
5.4.1 Legitimacy Through Intervention, 1930–1931 261
5.4.2 The Failure of the Voluntary Codes 264
5.4.3 Mandatory Margining 269
5.5 The Commodity Exchange Act and the Grain Gambler 274
5.5.1 In Defence of the Small Speculator 274
5.5.2 A Policy Window Opens 276
5.5.3 The Final Commodity Exchange Act 281
5.6 Conclusions 283
5.6.1 From Gambling as Social Disease to Being in the Public Interest 284
5.6.2 Rent-Seeking Versus the Public Interest 286
Bibliography 288
Chapter 6 The Legacy, Causes and Relevance of Interwar Futures Market Regulation 292
6.1 The Legacy of the Interwar Period 292
6.1.1 Market Transparency 294
6.1.2 A Regime of Co-regulation and Enforced Self-regulation 298
6.1.3 Key Institutions 299
6.2 The Causes of Interwar Futures Market Innovation 300
6.3 Implications 307
Bibliography 309
Bibliography 313
Index 329

Produkt-Details

• Erscheint lt. Verlag: 21.12.2018
• Reihe/Serie: Palgrave Studies in the History of Finance
• Zusatzinfo: XIX, 321 p. 5 illus., 1 illus. in color.
• Verlagsort: Cham
• Sprache: englisch
• Themenwelt: Wirtschaft ► Allgemeines / Lexika
• Schlagworte: financial market innovation • Financial Markets • Financial markets government policy • History of Financial Markets • History of markets • Investments and Securities • Modern Futures Trading • regulation theory • US interwar collaboration
• ISBN-10: 3-319-93184-9 / 3319931849
• ISBN-13: 978-3-319-93184-5 / 9783319931845