Building financial derivatives exchanges demanded large unpaid, personally costly commitments from organizers

Evidence

On the Mercantile Exchange, similarly, Leo Melamed devoted large amounts of time he could otherwise have spent on profitable trading to leading its move into financial derivatives. He continued to trade in the pits (part of his authority came from the fact that he led the Merc from there), but his duties chairing the Merc often kept him from paying full attention to trading, and he suffered losses. … However, Melamed rejected all proposals to pay him until the need to respond to the crisis of 1987 made clear that “the demand on my time was such that I could no longer trade effectively” (Melamed and Tamarkin 1996, p. 281). Furthermore, although the Merc’s financial derivatives trading became profitable and self-sustaining, there were as discussed below periods in which Melamed had to encourage the Merc’s members to take part in it even if their profits were likely to be low He could not instruct them to do so: he was their elected representative, not their employer. All he could do was to seek to persuade them to act for the collective good of the exchange. — Donald MacKenzie, An Engine, Not a Camera, 671

Categorization

• XREF: Melamed’s situation echoes the Board of Trade founders in the same chapter who also lent money and forewent income to launch the options exchange. — connects to: Traders made costly unremunerated commitments to build the exchange, resembling collective action. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 69; Launching a new market contract requires coercive mobilization of its own members. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 774; LOR’s own founders feared their trading would move markets — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 812 (+5 more)

Broader Connections

• Options-exchange founders worked unpaid out of felt obligation to the exchange community #exemplifies (0.95) — Donald MacKenzie, An Engine, Not a Camera, 677
• Cold rational egoism cannot explain the founding of modern derivatives exchanges #corroborates (0.90) — Donald MacKenzie, An Engine, Not a Camera, 678
• Pure rational self-interest cannot explain founding a derivatives exchange #corroborates (0.90)
• New derivatives markets initially lacked liquidity and depended on founders’ moral suasion to survive #expands (0.85) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 84
• New financial markets require coercive persuasion of members to create initial liquidity #expands (0.80) — Donald MacKenzie, An Engine, Not a Camera, 691