Financialization and Information Technology: Themes, Issues and Critical Debates

Home , Subprime mortgage crisis

Editorial Financialization and information technology: themes, issues and critical debates – part I Wendy L. Currie1, Thomas Lagoarde-Segot2

1Audencia Business School, Nantes, France; 2Kedge Business School, Marseille, France

Correspondence: Wendy L. Currie, Audencia Business School, Nantes, France. Tel: + 33 (0) 240 37 34 07; E-mail: [email protected]

Journal of Information Technology (2017) 32, 211–217. doi:10.1057/s41265-017-0044-8; published online 15 August 2017

The online version of this article is available Open Access

ince the mid-1980s, the growth of computerization in levels and units of analysis (Krippner, 2005). Second, it financial markets has been significant. Technological situates financialization in the context of financial innovation S advances have changed the economics of finance and and technology. More specifically, it considers how technol- banking. The extant literature shows how the trading process ogy mediates and shapes financial markets in periods of has become increasingly automated, from order entry to stability and crisis. Third, it recommends more multidisci- trading venue to the back office (Kirilenko and Lo, 2013). plinary theoretical and empirical work to distinguish accounts Despite vast technological changes over several decades, there which treat financialization as a descriptive variable or as a are relatively few studies in information systems and causal variable with wider implications for markets, firms and management scholarship on the transformation of financial investors (Casey, 2012; Lapavitsas, 2011). trading and markets which embrace wider issues of the Part I begins with an examination of themes, issues and positive and negative aspects of financialized economies critical debates in the financialization literature. It then gives (Starkey, 2015). Studies published prior to the financial crisis examples of how scholars have identified information technol- of 2008 examine topics including, information technology ogy as playing an important role in financial markets and in and time-based competition in financial markets (Dewan and financialization. This section distinguishes financial innovation Mendelson, 1998), artefacts used in electronic trading and from technological innovation – two terms often conflated in banking (Barrett and Walsham, 1999; Clemons and Weber, the social sciences. A brief overview is then given on method- 1996) and asymmetric information and insider trading ological considerations to note that correlation and causality (Marsden and Tung, 1999). Following the financial melt- require greater transparency in financialization studies which down, research has considered investor competence and sometimes confuse outcomes as being the direct result of policy trading (Graham et al., 2009), experimentation in financial decisions or technological change. The editorial continues markets (Massa and Simonov, 2009), financial objects in with a brief discussion on the criticality of problematizing investment banking (Muniesa et al., 2011) and regulatory financialization as a phenomenon which requires more refined compliance (Bamberger, 2009; Gozman and Currie, 2014). definitions and disciplinary integration. Finally, a brief over- This special issue on financialization and information view is given of each of the five papers featured in this issue. technology is organized in two parts, with the first introduc- ing themes, issues and critical debates, and the second, discussing the importance of multi-paradigmatic approaches Financialization: themes, issues and critical debates to finance and IT. The issue has three objectives. First, it The financialization thesis spans several social science disci- combines scholarship from social science disciplines (finance, plines with a variety of definitions. The common thread is the information systems, political economy) on complex theo- pervasive financialization of global economies (Epstein, 2005) retical, empirical and practical issues and debates within and the ‘increasing importance of financial markets, financial financialization, in which multiple actors interact via different motives, financial institutions, and financial elites in the Editorial 212 operation of the economy and its governing institutions, both illustrate an example of globalization. Here, outsourcing is at the national and international levels’ (Epstein, 2002, p. 2). presented as a policy decision of firms that seek to cut labour Financialization examines how individuals, firms and econo- costs by relocating their information technology assets in mies are mediated by changing relationships in financial countries with cheap labour and less regulation (Milberg and markets (Montgomarie and Williams, 2009, p. 100), how Winkler, 2009). Dore suggests, ‘Financialization is a bit like economic activity is influenced by the logics and imperatives of ‘‘globalization’’—a convenient word for a bundle of more or interest-bearing capital (Fine, 2010, p. 99), and how regulation less discrete structural changes in the economies of the is imposed on financial firms with implications across multiple industrialized world’ (Dore, 2008, p. 1097). Other literatures legal and regulatory jurisdictions (Krippner, 2005). on the ‘hegemony of financialization’ from spatial geography Financialization fuels public policy concerns at macroeco- locate the origins of the 2008 crisis under four distinct spaces. nomic and microeconomic levels (Palley, 2007, p. 3) since it is The role of information technology is implied in this work the mechanism through which individuals interact with which considers how competition operates in international complex and deregulated global capital markets (Casey, financial centres (such as London and New York), the 2012, p. 13). The effects of financialization are considered to ‘insularity’ of day-to-day ‘geographies of money’, ‘structural be wide ranging despite the concept remaining ‘raw and dependencies’ (between China and the USA) and the undeveloped’ (Lapavitsas, 2011, p. 611). In politics, economics ‘growing power of the financial media’ (French, Leyshon and sociology, financialization occupies centre stage in critical and Thrift, 2009). debates. Neoliberal financialization, for example, is viewed as Unlike the financialization literature which remains rela- the cause of a secular trend in rising social inequality (Piketty, tively silent on the artefacts, mechanisms and complexities of 2014). This body of work goes beyond correlating financial- information technology on global financial systems, firms ization with increasing economic and social problems towards and markets, the information systems literature situates causal explanations (Palley, 2007). In this politically charged information technology at centre stage of research enquiry. debate, the financialization links inequality with two compet- Information systems scholars examine a variety of topics ing positions – that financialization causes inequality (Lazon- given lip service by financialization scholars, with examples of ick, 2010) or inequality causes financialization (Saith, 2011). computerization in financial markets (Kauffman et al., 2015; Similarly in classical Marxist political economy, financial- Gozman and Currie, 2014), developing countries (Avgerou, ization is seen as a driver for the systematic transformation of 2008) health and social care (Braa et al., 2007) and global mature capitalist economies (Lapavitsas, 2011, p. 611). outsourcing (Lacity et al., 2011). In many ways, financializa- Financialization as a process interacts with financial markets, tion and technological changes represent two sides of the financial institutions and financial elites to acquire greater same coin. Financialization, looking through the telescope, influence over policy and outcomes. Process accounts observes the big picture of how financialization has shifted identify three distinct conduits as financialization changes industrial capitalism to financial capitalism, with technology the structure and operation of financial markets, modifies the playing a large part in this process (Lapavitsas, 2011). Many behaviour of nonfinancial corporations and shapes macro- studies ‘interrogate how an increasingly autonomous realm and microeconomic policy (Palley, 2007, p. 2). of global finance has altered the underlying logics of the The expanding body of work on financialization recognizes industrial economy and the inner workings of democratic the importance of information technology in shaping the society’ (Van der Zwan, 2014, pp. 99–100). Information future direction of finance and financial markets (Lapavitsas, systems scholars more commonly look through the micro- 2011). How and why information technology changes the scope to observe the social and organizational landscape to ‘mix of labour skills deployed by financial intermediaries’, examine the adoption and deployment of information however, is not well understood or articulated (Lapavitsas technology (Avison, 1995). The majority of this work, and Dos Santos, 2008). This is a missed opportunity in however, does not penetrate the macro-social phenomena studies from political economy and sociology, as relentless to describe or explain the extent to which technology technological change over several decades has transformed mediates regulatory, market and firm practices. the financial sector, with the displacement of ‘humans’ on the The pervasive effects of information technology on numer- trading floor, replaced by ‘robo’ or ‘algorithmic’ trading ous industrial sectors (finance, healthcare, education, hous- (Mackenzie, 2015). Labour inequality as an illustration of ing) over several decades provide an even stronger case for financialization features more widely in other social sciences multidisciplinary academic research which links themes, disciplines. An opportunity exists for information systems issues and critical debates. Combined with the financialization researchers to contribute to financialization debates by literature, a multi-level (macro, meso and micro) approach examining the mediating role of information technology offers a deeper analysis of how policy making at the societal between markets, regulators, firms and investors. level (i.e. financial/technological regulations, taxes, sanction) impacts financial markets, institutions, organizations and individuals, with technology playing a mediating role. Financialization and information technology The shortage of academic scholarship on the relationship The relationship between financialization and information between financialization and information technology offers technology is underplayed in the broader financialization an opportunity for researchers to consider a number of literature, yet recognized as a significant factor in the questions. For example, What role did information technology development of global financial markets and institutions play in the global financial crisis? How is information (Freedman, 2006). Financialization studies from economics technology used to develop new financial products and services? and political science situate information technology more Does information technology change the nature of financial commonly under the theme of global outsourcing to markets/trading? To what extent is financial trading being Editorial 213

‘taken over’ by robot technologies? How can regulators keep pace in CDOs (SIFMA, 2010). As many banks experienced huge with information technology? How do countries differ in support losses, the interbank lending market stagnated, as no bank and governance of financial markets? would lend to another bank holding CDOs. The banking Following the 2008 financial crisis, attention has focused on crisis witnessed CitiGroup losing $34 billion on mortgage the role of financial and technological innovation (i.e. new CDOs and Merrill Lynch losing $26 billion. The insurer AIG technology-enabled financial products and services) which is was seriously damaged due to selling $500 billion worth of shaped by, and serves to influence, the policies and practices Credit Default Swaps to insure against defaults on CDOs, that drive modern industrialized economies (Funk and since it was unable to meet such payments. Hirschman, 2014). Financial innovation is distinct from technological innovation, although both terms are often used interchangeably across literature streams: ‘Financial innovation Technological innovation: high-frequency trading involves creating and disseminating new financial instruments, A major technological innovation in financial services in including financial technologies, institutions and markets, as well recent years has been high-frequency trading (HFT). HFT is a as institutional, product and process innovation’ (FT, 2016). subset of algorithmic trading which uses proprietary algo- Similarly, ‘Technological innovations comprise new products and rithms. Typically, trading follows two forms. First, execution processes and significant technological changes of products and trading typically involves a large order executed via a processes. An innovation has been implemented if it has been computerized algorithm using a program designed to secure introduced on the market (product innovation) (OECD, 2016). the best price (Brogaard et al., 2014). The order may be split To illustrate how financial innovation and technological into smaller pieces (tranches) and executed at different times. innovation, respectively, play pivotal roles in financialized Second, rather than executing a set order, HFT algorithms economies, we provide two examples. The first, which we search for small trading opportunities in the market. It is categorize as financial innovation, is collateralized debt estimated that 50 per cent of stock trading in the USA is obligations (CDOs) which were heavily criticized following driven by HFT (Nasdaq, 2016). the financial crash for contributing to the housing bubble A growing body HFT literature considers the impact of which led to the US subprime mortgage crisis (Angelides and ‘speed technology’ on financial trading and market liquidity Thomas, 2011). The second is a technological innovation in (Currie and Seddon, 2016; Pagnotta and Philippon, 2016). the form of high-frequency trading (HFT) which has HFT is a highly controversial topic. The trillion-dollar stock transformed financial markets and trading. market ‘Flash Crash’ of 2010 lasted for 36 min and saw stock indexes, (i.e. the S&P 500, Dow Jones Industrial Average and Nasdaq Composite) collapsing and rebounding back (Kir- Financial innovation: the collateralized debt obligation (CDO) ilenko et al., 2017). Coupled with this event, the publication In recent years, scholars have considered emerging financial of Michael Lewis’ (2014) best-selling book Flashboys which innovations, and more crucially, their impact (both positive claims the (financial) markets are ‘rigged’ was short on and negative) on financial markets and firms (Styhre, 2015). empirical data (as HFTs were not interviewed) yet attracted a One example is the collateralized debt obligation (CDO) which lot of media publicity as an illustration of the pathologies of is singled out as having a deleterious effect on the economy and contemporary financial markets. society at large (Litan, 2010). A CDO is a structured financial So far, there is limited academic research on HFT which product that combines cash flow-generating assets that are uses real data as opposed to simulated theoretical models of repackaged into discrete tranches and sold to investors. how speed affects market liquidity. Recent empirical studies Technology has played an important part in the CDO market, offer more nuanced results in the debate about HFT’s not only by facilitating interconnectivity across banks, but also positive or negative market effects. One study found that by concealing the hidden complexities and constituent risks increasing the speed of market-making participants has from regulators and investors (DeBenedictus, 2008). positive benefits to market liquidity. (Brogaard et al., 2015). Prior to the crisis, a single bank could pool together 5000 Another study identified clusters of extremely high and different mortgages into a CDO. An investor who purchased extremely low limit-order cancellation activity, observing the CDO was paid the interest owed by the 5000 borrowers that HFTs bring efficiency to the market without the need to whose mortgages made up the CDO, but faced the risk that have executions at intermediate prices (Blocher et al., 2016). some borrowers may default on their loans. The pooled assets (i.e. mortgages, bonds and loans) become debt obligations that made up the collateral for the CDO. The tranches in a Financialization as a descriptive or causal variable CDO varied in their risk profile, with senior tranches having The relationship between financialization and information first priority on the collateral in the event of default. The technology is complex since there are mediating processes senior tranches of a CDO generally have a higher credit rating between the two that need to be empirically examined if the with lower coupon rates compared with junior tranches that concept of financialization is to go beyond descriptive offer higher coupon rates to compensate for their higher accounts towards a causal explanation of financial market default risk (Investopedia, 2017). CDOs were created and events. The above examples of financial and technological sold by most major banks (e.g. Goldman Sachs, Bank of innovation raise important questions about whether a two- America) over the counter, i.e. they were not traded on an tiered financial market exists caused by ‘asymmetric infor- exchange but were bought directly from the bank. mation, potential volatility, ‘‘noise’’ and informational dis- Leading up to the crisis, the financial industry faced tortions, out of control algorithms, and ‘‘flash crashes’’’ (Bell, meltdown as banks had acquired a trillion dollars in 2013, p. 1). HFTs in tier 1 benefit from access to fast worthless assets with about half this figure (US$503 billion) technologies and lower latency which is the speed of trade Editorial 214 execution. Low-frequency traders operating in tier 2 do not deploy financial and technological innovations with mixed have these advantages, but the extent to which they are outcomes. Financialization scholars suggest the problems damaged by HFTs continues to be the subject of much debate built up in the financial system over many decades are multi- (see paper 4 in this issue by Cooper et al.). faceted. Neoliberal ideology which advocates free markets, Indeed, the effects and processes of financialization deregulation and fragmentation of financial markets leads to mediated by technology need to distinguish between descrip- structural and operational changes (Casey, 2012) with easy tive and causal variables. Financialization as a state-of-affairs access to credit and burgeoning household debt which describes how finance accounts for a larger percentage of impacts macroeconomic outcomes and business cycles (Pal- economic activity than in previous decades, leading some ley, 2007, p. 16). authors to go from description to causation irrespective of Critics of financialization argue that finance is discon- considering the empirical linkages (Casey, 2012). The body of nected from the real economy. Finance is primarily con- work on ‘the insidious power of excessive financialization’ cerned to play an intermediary role by channelling resources (Denning, 2014), for example, is replete with examples of the into productive investments (Shiller, 2012). Deregulation and economic and social problems stemming from financializa- fragmentation of financial markets has enabled banks to tion, including rising income inequality (Piketty, 2014), focus on arbitrage within secondary markets by creating banks too big to fail (Brewer and Jagtiani, 2013), perverse exotic and complex financial instruments to extract profits by financial market designs (Budish et al., 2015) and unfair exploiting volatility and asymmetrical information. CDOs financial trading practices (Dolgopolov, 2014) to name just a and HFT are just two examples which have come under few. In fact, many descriptive accounts of the effects and heavy criticism in recent years for their real and perceived processes of financialization are treated as causal accounts, negative effects on markets and investors. although they present arguments that are more correlative. Problematizing financialization, however, often breaks Whilst policy-makers, academics and practitioners seek down on conceptual and empirical grounds. Conceptually, answers to questions which pursue more causal explanations, the argument presented often falls on ‘a distinction between it is vitally important that researchers desist from jumping on socially beneficial versus socially detrimental investment’ the bandwagon of politically charged debates surrounding which is an ‘intellectually fraught and value-laden exercise’ financialization by presenting correlation as causation (Aı¨t- (Casey, 2012, p. 8). Empirical data linking variables in the Sahalia and Saglam, 2013; Hoffman, 2014). causal chain (i.e. flash crashes) is demonstrated, with the ‘connection between them inferred from their concurrence in time’ (Casey, 2012, p. 14). Here, the case being made is often Financial market and flash crashes correlative rather than causal. Financialization scholars need Prior to the financial crisis of 2008, the financial markets were to consider the robustness and consistency of their data coming under increasing scrutiny by academics, regulators, sources to support the purported causal connections. investors and the media. Financial innovations such as Other writers discuss problems in analysing financializa- derivatives were described as ‘financial weapons of mass tion due to difficulties in identifying the mediations through destruction, carrying dangers that, while now latent, are which production output is linked to finance. A theory of potentially lethal’ (Buffet, 2002). Following the crash, questions financialization needs to embed the changes in the ‘behavior were raised about financial market fragmentation and dereg- of industrial enterprises, banks and workers, while being ulation, the role of rating agencies in assessing risk from CDOs aware of transformation in the structures of the international and the impact of HFTs in changing market microstructure. financial system’ (Lapavitsas, 2011, p. 618). Financialization The Flash Crash of 2010 focused attention on whether HFT has attracted less favourable comments as institutions and directly caused market instability and volatility or was simply individuals prioritize ‘making money out of money’ (Den- correlated with this adverse event (Kirilenko et al., 2014). ning, 2014) rather than operating within the realm of Isolating the variables for financial market and flash ‘socially productive finance’ (Litan, 2010). crashes is challenging. For academic researchers, obtaining An extensive review of the financialization literature is commercially sensitive quantitative and qualitative data on beyond the scope of this editorial. However, Part II presents a financial market trading, especially is problematic, not least more detailed exposition of a multidisciplinary and multi- because of the high cost of obtaining large datasets and the paradigmatic approach to financialization in the context of reluctance of financial technology (FinTech) companies, such information systems research. as HFTs to allow third party scrutiny of their data. These challenges make it difficult for researchers to ‘dig deep’ into the strategies and practices of computerized high-frequency Special issue papers and algorithmic trading firms to determine how and why In the first paper of this special issue ‘Crossing The Next human and/or computer interventions are implicated in Frontier: The Role Of ICT In Driving The Financialization of adverse market events. Credit’, Daniel Drummer and colleagues develop a general framework to help better understand the relationship between information and communications technology Problematizing financialization (ICT) and financialization. Following the unprecedented In this special issue, we seek to problematize the intersection shift from industrial to financial capitalization, they concen- of finance and information technology. We encourage more trate their work on the direct market access that has been work which goes beyond describing how technology impacts enabled by electronic trading. They focus on one class of asset financial markets, towards a deeper analysis of the economic – consumer credit, and through structured interviews and social consequences of financialized economies which develop their model using the theme of how ICT enabled Editorial 215

financial actors can invest directly in household credit. accounting fraud; investment fraud; insider trading and Investors are now able to gain direct access to equity, rather financial instrument manipulation. Their work suggests than through stock brokers. Whilst the market structure how each can be identified and the differences that each has been changed by the financial–economic environment exhibits. They suggest that if their work is integrated into a and regulations, ICT is presented as the fundamental lever decision support system it could help with fraud detection. in reducing transaction costs. The new lending model In the fourth paper ‘High Frequency Trading and which has allowed prospective borrowers to publish loan Conflict In The Financial Markets’, Rick Cooper, Jon requests on an online platform, allowing individuals or Seddon and Ben Van Vliet argue that HFT is a new form institutions to decide if they want to lend to them, is of financialization, driven by the use of computers in developed. The advantages of disintermediation have financial trading. They call this new behaviour algorith- spread from peer-to-peer lending to an industry dominated mization, characterized by profit-seeking programmable by professional investors. Potential downsides are pre- procedures. They argue that the role of HFT is to keep the sented, such as how borrowers make less rational choices if markets liquid and informationally efficient. Having looked they know their loans are not held by a bank, leading to in detail at how HFT behave, they contrast these activities excessive debt. This work identifies marketplace lending as with those of the broker-dealers who have traditionally been an area where ICT is expected to significantly fuel involved in helping investors to trade, the low-frequency financialization now and in the near future. The credit trader (LFT). Interviewing in both the USA and UK, they business is currently undergoing a shift away from banks have built up a picture of the evolution of HFT, and from towards online market lending, and this offers rapid the perspective of the end investor, examined how orders transaction execution and lower costs. are executed. They examine the conflict between LFT and The second paper ‘Social Machines: How recent techno- HFT, describing how the market had fundamentally logical advances have aided financialization’ by Tiejun Ma changed, and the high costs which are now necessary to and Frank McGroaty has borrowed the concept of ‘Social compete for profits. They conclude by looking at how Machines’ (Smart et al., 2014)topresentasingleconcept regulation needs to be reviewed. Those issues identified in that provides a holistic framework to capture an ensemble the taxonomy of paper 3 must be prevented, but they argue view of financial systems. They present an important that excessive regulation is both slow to implement and question on how finance Social Machines such as high- expensive to conduct and may encourage additional frequency trading, sentiment analysis and smart mobile manipulation. devices impact on the financial system. They used an The final paper ‘High-Frequency Trading and Its Role In inductive (theory building) approach because these subjects Fragmented Markets’ is by Martin Haferkorn and colleagues. are still going through many dynamic and evolutionary This is the second paper which looks more closely at HFT changes. Three qualitative case studies are presented, one on activities. Whilst the fourth paper looked at the differences each area. The first looks at how automated trading makes between HFT and LFT, this paper examines the effect of sense of the market financialization process (such as market efficiency across fragmented markets. In an attempt consumer confidence) and may amplify speculative beha- to analyse whether there are any positive spill-offs for market viour. The second case study looked at social network participants who do not invest in IT, these authors analyse information diffusion and sentiment analysis. Internet how IT affects the European securities market. IT, as has been technology has played an important part as it shares argued in earlier papers, is a key driver for financialization. information from social networks. In the financial markets, This paper explores whether the reduced costs for electronic methodologies that use social media extract content markets (Malone et al., 1987) hold true for securities through the wisdom of the crowd. The third case studies markets. Their empirical research focused on two markets: the mobile internet involving factors such as individual Euronext in Paris; Bats Chi-X Europe in London. This preference, culture and social context. enabled them to show that HFT decreased the mean price, The third paper ‘A Taxonomy of Financial Market supporting predictions made by Gerig (2012) that HFT Manipulations: Establishing Trust And Market Integrity In makes prices more accurate. They also discuss the concern The Financialized Economy Through Automated Fraud that regulation can decrease market efficiency. The paper Detection’, by Michael Siering and colleagues presents a looks at the upcoming MiFID II which is heavily focused on detailed account of all of the currently known methods HFT. They debate the need for more evidence on HFT’s behind market manipulation. The growth of financialization activities, especially since their work has shown that HFT cannot be allowed to continue without the necessary checks increases market efficiency as it transmits price information on trading activity so as to monitor and aid in the detection between separate markets. of fraudulent activity. Such weak regulation and control, they argue, contributed to the 2007 financial crisis. Confusing terminology is prevalent in the financial markets References with respect to different manipulation techniques and their characteristics which hampers efficient fraud detection. Aı¨t-Sahalia, Y. and Saglam, M. (2013). High Frequency Traders: Taking Collecting their research data from the SEC’s litigation press Advantage of Speed. National Bureau of Economic Research Working Paper releases, EU benchmark regulation and a structured liter- No. w19531. Angelides, P. and Thomas, B. (2011). The Financial Crisis Inquiry Report: Final ature review, current abusive techniques have been identi- Report of the National Commission on the Causes of the Financial and fied. Using structured cluster analysis, they are able to Economic Crisis in the United States (Revised Corrected Copy) Government categorize twenty-five different manipulation techniques Printing Office. https://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC. into four categories of fraudulent activity. These are pdf. Editorial 216

Avgerou, C. (2008). Information Systems in Developing Countries: A Critical Gozman, D. and Currie, W.L. (2014). The Role of Investment Management Research Review. Journal of Information Technology, 23, 133–146. Systems in Regulatory Compliance: A Post-Crisis Study of Displacement Avison, D. (1995). What is IS? An inaugural lecture delivered at the University of Mechanisms. Journal of Information Technology, 29(1), 44–58. Southampton, 3 November. Graham, J.R., Harvey, C.R., and Huang, H. (2009). Investor Competence, Bamberger, K.A. (2009). Technologies of Compliance: Risk and Regulation in a Trading Frequency, and Home Bias. Management Science, 55(7), 1094–1106. Digital Age. Berkeley Law Scholarship Repository. http://scholarship.law. Hoffmann, P. (2014). A Dynamic Limit Order Market with Fast and Slow berkeley.edu/cgi/viewcontent.cgi?article=2665&context=facpubs. Traders. Journal of Financial Economics, 113, 156–169. Barrett, M. and Walsham, G. (1999). Electronic Trading and Work Transfor- Investopedia. (2017). http://www.investopedia.com/terms/c/cdo.asp. Accessed 18 mation in the London Insurance Market. Information Systems Research, 10(1), January. 1–22. Kauffman, R.J., Hu, Y. and Ma, D. (2015). Will High-Frequency Trading Bell, H. (2013). High frequency trading: Do regulators need to control this tool of Practices Transform the Financial Markets in the Asia Pacific Region? Financial informationally efficient markets? CATO Institute, Policy Analysis No. 731. Innovation 1(4). Blocher, J., Cooper, R., Seddon, J. and Van Vliet, B. (2016). Phantom Liquidity Kirilenko, A. and Lo, A.W. (2013). Moore’s law versus Murphy’s law: and High Frequency Quoting. The Journal of Trading, 11(3), 6–15. Algorithmic trading and its discontents. Journal of Economic Perspectives, 27(2), Braa, J., Hanseth, O., Heywood, A., Mohammed, W. and Shaw, V. (2007). 51–72. Developing Health Information Systems in Developing Countries: The Flexible Kirilenko, A., Kyle, A.S., Samadi, M. and Tuzun, T. (2014). The Flash Crash: Standards Strategy. MIS Quarterly, 31(2), 381–402. The Impact of High Frequency Trading on an Electronic Market (PDF), 5 May. Brewer, E. and Jagtiani, J. (2013). How Much Did Banks Pay to Become Too- http://www.cftc.gov/idc/groups/public/@economicanalysis/documents/file/ Big-ToFail. Journal of Financial Services Research 1–35. oce_flashcrash0314.pdf. Brogaard, J., Hagstro¨mer, B., Nordeń, L. and Riordan, R. (2015). Trading Fast Kirilenko, A., Kyle, A.S., Samadi, M. and Tugkan, T. (2017). The flash crash: and Slow: Colocation and Liquidity. The Review of Financial Studies. doi:10. High frequency trading in an electronic market. Journal of Finance. doi:10.1111/ 1093/rfs/hhv045. jofi.12498. Brogaard, J., Hendershott, T. and Riordan, R. (2014). High Frequency Trading Krippner, G.R. (2005). The Financialization of the American Economy. Socio- and Price Discovery. Review of Financial Studies, 27(8), 2267–2306. Economic Review, 3(2), 1730208. Budish, E., Cramton, P. and Shim, J. (2015). The High-Frequency Trading Arms Lacity, M., Khan, S.A. and Willcocks, L.P. (2011). A Review of the IT Race: Frequent Batch Auctions as a Market Design Response. The Quarterly Outsourcing Literature: Insights for Practice. In R. D. Galliers and W. L. Currie Journal of Economics, 130(4), 1547–1621. (Eds.), The Oxford Handbook of Management Information Systems (pp. Buffet, W. (2002). Warren Buffet on Derivatives. http://www.fintools.com/docs/ 496–528). Oxford: Oxford University Press. Warren%20Buffet%20on%20Derivatives.pdf. Lapavitsas, C. (2011). Theorizing Financialization. Work, Employment and Casey, T. (2012). Is financialization the archilles’ heel of Anglo-American Society, 25(4), 611–626. Capitalism? In The sheffield political economy research institute (SPERI) Lapavitsas, C. and Dos Santos, P. (2008). Globalization and contemporary conference on ‘the British Growth Crisis: The Search for a New Model’ (pp. banking: On the impact of new technology. Contributions to Political Economy, 16–18). 27, 31–56. Clemons, E.K. and Weber, B.W. (1996). Alternative Securities Trading Systems: Lazonick, W. (2010). Innovation Business Models and Varieties of Capitalism: Tests and Regulatory Implications of the Adoption of Technology. Information Financialization of the US Corporation. Business History Review, 84, 675–702. Systems Research, 7(2), 163–188. Lewis, M. (2014). Flash boys. Harmondsworth: Penguin. Currie, W.L. and Seddon, J.J.M. (2016). The Regulatory, Technology and Market Litan, R. (2010). In Defense of Much, But Not All, Financial Innovation. ‘Dark Arts Trilogy’ of High Frequency Trading: A Research Agenda. Journal of Bookings Institution. https://www.brookings.edu/wp-content/uploads/2016/ Information Technology. doi:10.1057/s41265-016-0025-3. 06/0217_financial_innovation_litan.pdf. DeBenedictus, M. (2008). Technology’s Role in Restoring the CDO Market. Mackenzie, D. (2015). Dark markets. The London Review of Books, 37(11), 29–32. Mortgage Banking. https://www.questia.com/magazine/1P3-1619016851/ Malone, T.W., Yates, J., Benjamin, R.I., et al. (1987). Electronic markets and technology-s-role-in-restoring-the-cdo-market. electronic hierarchies. Communications of the ACM, 30(6), 484–497. Denning, S. (2014). Why Financialization has Run Amok. Forbes. http://www. Massa, M. and Simonov, A. (2009). Experimentation in financial markets. forbes.com/sites/stevedenning/2014/06/03/why-financialization-has-run-amok/ Management Science, 55(8), 1377–1390. print/. Marsden, J.R. and Tung, Y.A. (1999). The Use of Information System Dewan, S. and Mendelson, H. (1998). Information Technology and Time-Based Technology to Develop Tests on Insider Trading and Asymmetric Information. Competition in Financial Markets. Management Science, 44(5), 595–609. Management Science, 45(8), 1025–1040. Dolgopolov, S. (2014). The Maker-Taker Pricing Model and Its Impact on the Milberg, W. and Winkler, D. (2009). Financialization and the Dynamics of Securities Market Structure: A can of Worms for Securities Fraud? Virginia Law offshoring in the USA. Cambridge Journal of Economics, 34(2), 275–293. and Business Review, 8(2), 232–272. Montgomarie, J. and Williams, K. (2009). Financialized capitalism: After the Dore, R. (2008). Financialization of the Global Economy. Industrial and Corporate crisis and beyond neoliberalism. Competition and Change, 13, 99–107. Change, 17, 1097–1112. Muniesa, F., Chabert, D., Ducrocq, M. and Scott, S. (2011). Back-Office Epstein, G. (2002). Financialization, Rentier Interests, and Central Bank Policy. Intricacy: The Description of Financial Objects in an Investment Bank. Department of Economics and Political Research Institute (PERI), MIT. Industrial and Corporate Change, 20(4), 1189–1213. https://pdfs.semanticscholar.org/a5cd/ Nasdaq. (2016). High Frequency Trading. Definiiton. http://www.nasdaq.com/ 3101e19d3b78bd4438533a3f689406a3912d.pdf. investing/glossary/h/high-frequency-trading. Epstein, G. ed. (2005). Financialization and the World Economy. Edward Elgar, OECD. (2016). Frascati Manual: Proposed Standard Practice for Surveys on UK. MA, December. Research and Experimental Development, 6th Edition. Technolgical Innova- Fine, B. (2010). Locating Financialization. Historical Materialism, 18, 97–116. tion. https://stats.oecd.org/glossary/detail.asp?ID=2688. Freedman, R.S. (2006). Introduction to Financial Technology. Burlington: Pagnotta, E.S. and Philippon, T. (2016). Competing on Speed. SSRN.com. Academic Press. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1967156. Financial Times. (2016). Financial Innovation. http://lexicon.ft.com/Term?term= Palley, T.I. (2007). Financialization: What it is and Why it Matters. Working financial-innovation. Paper 525. The Levy Economics Institute. http://www.levy.org. French, S., Leyshon, A. and Thrift, N. (2009). A Very Geographical Crisis: The Piketty, T. (2014). Capital in the Twenty-First Century. President and Fellows of Making and Breaking of the 2007–2008 Financial Crisis. Cambridge Journal of Harvard College, USA. Regions, Economy and Society, 2(2), 287–302. Saith, A. (2011). Inequality, Imbalance, Instability: Reflections on a Structural Funk, R.J. and Hirschman, D. (2014). Derivatives and Deregulation: Financial Crisis. Development and Change, 42(1), 70–86. Innovation and the Demise of Glass-Steagall. Administrative Science Quarterly, Securities Industry and Financial Markets Association. (2010). Global Securi- 59(4), 669–704. tization Update. http://search.sifma.org/search?q=%24503+cdo&submit= Gerig, A. (2012). High-frequency trading synchronizes prices in financial markets. Go&site=SIFMA&client=SIFMA&proxystylesheet=SIFMA&output=xml_no_ Working paper. Cornell University Library. https://arxiv.org/abs/1211.1919. dtd. Editorial 217

Shiller, R. (2012). Finance and the Good Society. Princeton, NJ: Princeton Open Access This article is distributed under the terms of University Press. the Creative Commons Attribution 4.0 International License Smart, P., Simperl, E. and Shadbolt, N. (2014). A taxonomic framework for (http://creativecommons.org/licenses/by/4.0/), which permits social machines. In D. Miorandi et al. (Eds.), Social Collective Intelligence. Switzerland: Springer. http://link.springer.com/chapter/10.1007%2F978-3-319- unrestricted use, distribution, and reproduction in any 08681-1_3. medium, provided you give appropriate credit to the original Starkey, K. (2015). The Strange Absence of Management During the Current author(s) and the source, provide a link to the Creative Financial Crisis. Academy of Management Learning and Education, Vol. 40, Commons license, and indicate if changes were made. pp. 652–663, forthcoming 2015. doi: 10.5465/amr.2015.0109. Styhre, A. (2015). The Financialization of the Firm. Edward Elgar, UK. Van der Zwan, N. (2014). Making Sense of Financialization. Socio-Economic Review, 12, 99–129.