Portfolio insurers could publish their full contingent trading schedule in advance.

Evidence

LOR’s pre-crash experiments with sunshine trading were successful: “We made 13 large trades this way … and it was our belief that, on average, we got better prices.” (Rubinstein interview) The goal at that point was to reduce LOR’s transaction costs, but after the crash Leland and O’Brien saw sunshine trading as attractive for another reason. Instead of pre-announcing just one trade, portfolio insurers could make known “the table of trades that we would make at various market levels” (O’Brien interview), in effect publishing Gennotte and Leland’s it(po). — Donald MacKenzie, An Engine, Not a Camera, 882

Categorization

• SEED: The idea of publishing one’s ‘table of trades at various market levels’ is a striking inversion of opacity norms—an angle on how models become public knowledge can reshape market behavior.
• XREF: connects to: Portfolio insurance designed to limit losses can amplify market volatility. — Shapiro, Susan P., The Social Control of Impersonal Trust, 144

Broader Connections

• Portfolio insurance designed to limit losses can amplify market volatility. #complicates (0.80) — Shapiro, Susan P., The Social Control of Impersonal Trust, 144