Monday, July 20, 2020

Annunziata on Defoe on London Stock-Jobbing

Filippo Annunziata, Bocconi University, has posted At the Early Dawn of the Modern Regulation of Financial Markets: The Villainy of Stock-Jobbers (1701) and The Anatomy of Exchange Alley (1719) by Daniel Defoe:
In the year Robinson Crusoe (1719) is delivered to the press, Daniel Defoe publishes a magnificent pamphlet (The Anatomy of Exchange Alley: or a System of Stock-Jobbing) where he mercilessly exposes the serious embezzlement he observes on the London exchange market, throwing himself - with tones that are at times sarcastic, at times vehement - against the speculative activities of that time. Just like Robinson Crusoe's cannibals pounce on their poor victims, so the stock-jobbers devastate the market, manipulating it, and, in doing so, damage the stock exchange, the national economy, the Parliament, the Crown, and all the citizens of the Kingdom. The result is an apocalyptic vision of what, in the future, would become the most important financial market in Europe and that, in 1719, was still an infant, albeit a somewhat developed one. The text of 1719 is not a monad in Defoe's production, nor does it represent a one-off case of grievances against the vibrant speculations on the securities market, at the time allegedly perpetrated by the jobbers. In a previous libellus of 1701 - The Villainy of Stock Jobbers Detected and the Causes of the Late Run after the Bank and the Bankers Discovered and Considered - Defoe had already harshly stigmatized the conduct of London jobbers, thus becoming part of a larger literary vein of the time.

Many of the questions that Defoe raises still remain significant today; they underpin many of the policy choices that govern the regulation of stock exchanges, and, generally, of markets for financial instruments, in particular in the area of Market Abuse. Many of the situations that Defoe describes are a true anticipation, 300 years before hand, of the issues with which modern Legislation against Market Abuse is concerned: insider trading, market manipulation, appropriate disclosure of price-sensitive information. Market efficiency appears to have been right at the dawn of modern financial markets, a widely shared concern, that Defoe rightly captures in these writings.
–Dan Ernst