Friday, February 24, 2017

Alex Preda's "Noise"

Alex Preda is professor at King’s College London. He is the author of Framing Finance: The Boundaries of Markets and Modern Capitalism, and coeditor of the Oxford Handbook of the Sociology of Finance.

Preda applied the “Page 99 Test” to his new book, Noise: Living and Trading in Electronic Finance, and reported the following:
Noise. Living and Trading in Electronic Finance is an ethnographic book about why ordinary people engage in financial speculation, and about why they are encouraged to do so. This is puzzling, because there is plenty of evidence that these people lose money in the long run. And yet they do it. Why? The book is based on interviews and close observations with traders from the US and the UK, brokers, and operators of electronic trading platforms. It follows the motivations and dreams of these amateurs, but also the rationales of banks and brokerages that encourage them to trade.

The world of amateur traders may seem completely apart from that of professionals. But is that so? Page 99 is about how ordinary people are transformed into professional traders through trading competitions organized by banks. This is part and parcel of the ways in which banks recruit traders. Every year, young amateur traders enter these competitions hoping that at the finish line they will be offered a job by a bank. Why are competitions so important, and why are amateur traders so eager to engage in them? Participants do not compete with real money. Why do banks use them as a recruitment mechanism?
Competitions organized by investment banks can start with thousands of teams, only a few of whom will finish. Many teams will not trade throughout the entire allotted time, or will abandon the game. Nevertheless, what happens in such contests is that participants who make it through the entire game learn how to make decisions as part of a team. Competitive games are thus designed to replicate and anticipate real life organizational situations, where decisions are made in a team while profit is sought.
Learn more about Noise: Living and Trading in Electronic Finance at the University of Chicago Press website.

--Marshal Zeringue