Early Reflections on the Democratization of Organized Markets and Their Regulations

The early scientific literature which developed with the emergence of organized speculation on financial and commodity markets in the second half of the nineteenth century built on the identification of several categories of traders, from professional and amateur speculators to rentiers and members of the haute finance. Based on analysis of the interaction between these agents, this literature recognized the advantages of professional speculation as well as the problems posed by the widespread presence of amateurs. The aim of this paper is to reconstruct these debates, which took place in Europe and the United States and showed how opinions hovered between two poles. On the one hand, experts identified enhanced liquidity and diversity of view as the main advantages deriving from widespread market participation, while the stock exchange appeared as a means to empower the middle class, offering opportunities for general economic progress. On the other hand, as the number of traders increased, so did the share of amateurs and the incentive for professionals to reap profits by “fleecing” them, with destabilizing effects on the market. Pursuit of the right balance between these two poles raised interesting regulatory problems, not devoid of ethical considerations, which this work aims to reconstruct.