New financial markets require coercive persuasion of members to create initial liquidity

Evidence

When the Mere launched the S&P 500 index futures discussed below, Melamed was similarly active in pressuring and persuading its members to trade the new product. Other traders would show him their time-stamped trading tickets to demonstrate that they had done the 15 minutes of trading per day on the nascent market that Melamed demanded. They would be “ashamed not to” do this minimum for the collective good, says Melamed (interview). — Donald MacKenzie, An Engine, Not a Camera, 691

Categorization

• XREF: Connects to the broader performativity thesis: market liquidity is socially produced, not naturally emergent. Also echoes network/coalition-building literature in finance. — connects to: Pure rational self-interest cannot explain founding a derivatives exchange; New derivatives markets initially lacked liquidity and depended on founders’ moral suasion to survive — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 84; Taking positions makes traders materially part of the market — Karin Knorr Cetina & Urs Bruegger, Global Microstructures: The Virtual…, 75 (+7 more)

Broader Connections

• Market power lets an extralegal system coerce new entrants into adopting its rules. #complicates (0.72) — Lisa Bernestein, Opting out of the Legal System, 204
• Risk of undeserved loss was deliberately required to discipline individuals into market submission #complicates (0.70) — Jessica Whyte, The Morals of the Market, 209