SSE/EFI Working Paper Series in Business Administration,
Stockholm School of Economics

Abstract: The discreet charm of the stock broker: the social embeddedness of financial markets

Use of technology gives rise to impersonal relations in financial markets. Personal interaction is replaced by the cold rationality of algorithms. While working in financial markets, employees aim at being rational maximizers. This competition is balanced with a co-operative dimension. The market depends on, and is thus embedded in non-contractual elements such as morality and social capital. Custom creates the basis upon which exchange may take place and facilitates the organisation of economic activities. Trust enables us to engage in economic action. With a similar background, education, and by means of being part of one and the same culture, investors have similar values and beliefs. Actors use norms and habits that reduce the complexity of their work. Resources embedded in social relations and networks are accessed for utilitarian purposes.

Financial markets are disembedded while local contexts are replaced by a world-wide scope. Financial capitalism nonetheless becomes increasingly integrated in society, as eighty percent of the Swedish population own shares either directly or through funds. Media takes an increased interest for securities markets. The exclusivity of financial markets decreases.

Keywords: financial market; brokers; embeddedness; networks

21 pages, First version: June 1, 2004. Revised: January 19, 2005. Earlier revisions: January 19, 2005.

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