Speculative boundaries: Chicago and the regulatory history of US financial derivative markets

Abstract

This paper considers the history of governance and speculation on US derivative markets from their emergence in the middle of the 19th century through their incursion into finance in the late 20th century. It explores the importance of derivatives' extended ancestry in agricultural markets before analyzing their entanglement with financial markets, which came much later in the 1970s and 1980s. The paper is particularly concerned with the institutional inheritance of a set of legal-regulatory boundaries that prioritized price making and the speculative trading that was necessary to produce a consistent flow of prices. This governance system for derivatives is set in contrast with the governance of securities markets, which during the 1930s became subject to more strict government oversight, particularly with regard to speculative trading. The legal boundaries between these two markets began to deteriorate in the 1970s when the Chicago derivative exchanges applied the speculative logic of agricultural derivative markets to financial instruments. The implications of this are twofold. First the paper argues that market mechanisms and market regulation are analytically inseparable, and ought to be studied as such. Second, employing this approach, the paper argues that US financial derivative markets are originally 'derivative' not of New York and the finance sector, but of Chicago and the agricultural sector.

Berbahayakah Instrumen Derivatif Dalam Konteks Akuntansi?

“…Perusahaan cenderung dapat menghindari instrumen derivatif yang penggunaan nya tidak dikategorikan sebagai akuntansi lindung nilai (Lins, Servaes & Tamayo, 2011). Penggunaan instrumen derivatif untuk lindung nilai tidak terkait dengan akses terhadap instrumen derivatif dan juga tingkat corporate governance lokal (Ayturk, Gurbuz, & Yanik, 2016;Donati, Zuppiroli, Riani, & Verga, 2016;Ebell, 2016, Muellerleile, 2015.…”

A Journey Through the History of Commodity Derivatives Markets and the Political Economy of (De)Regulation

“…Laws and regulations have been particularly important to the development of derivatives markets. Originally, laws and regulations in the US were designed to coordinate geographically dispersed agricultural markets, afterward the legal infrastructures became a key element in the construction of a highly speculative financial system (Muellerleile, 2015).…”

“…This Act was approved after the grain price collapse following World War I, when CBOT speculators were blamed of the adverse price dynamics. The farm lobby put pressure on the Congress to ban totally futures trading, accusing the 'predatory' behaviour of speculators and the 'gambling' activities of the CBOT (Muellerleile, 2015). The Grain Futures Act of 1922 established that all grain futures trading could only take place on regulated exchanges which were required to prevent manipulation of prices or cornering 19 of the market.…”

Between perfection and damnation: The emerging geography of markets

“…A special issue of Environment and Planning A on ‘making markets’ illustrates the breadth of these projects. The issue includes case studies of the creation of markets for financial derivatives (Muellerleile, 2015), real estate (Akers, 2015), schooling (Cohen and Lizotte, 2015) and greenhouse gas emissions (Cooper, 2015). The work therein and similar projects on agro-markets in Ghana (Ouma et al, 2013; Ouma, 2015), construction markets in the UK (Lovell and Smith, 2010), and street markets in Yemen (Lauermann, 2013) highlight the different spaces, scales, and fields that markets populate as well as the diverse methods through which they can be understood.…”