Bill Maurer
Recent debates on globalization are frequently thin with details of the mechanisms that facilitate the flow of capital across borders. What on-the-ground, back-office practices constitute and expedite those flows? What cultural logics are embedded in those practices? How can examining the shop floors, as it were, of global capital movement point toward new analyses of globalization? Such questions require a consideration of the practices of securitization and securities clearance.
Given the globalization of U.S. techniques for the handling of securities, a shift in the discourse and practice of securities clearance and settlement in the United States has meant a tandem shift in the markets of the world. To describe this watershed in its most schematic and legal-jargon-laden form, a discourse of property rights and a practice of negotiability has in the late twentieth century shifted to a discourse of risk and practices of insurance and private justice.
It is salient that securities lawyers today seem to echo late-nineteenth-century laissez-faire advocates who sought to define property as not physical objects but bundles of rights based on market value. The similarity, however, extends only up to a point: Whereas late-nineteenth-century lawyers challenged physicalist definitions of property by asserting the rights of individual or corporate owners, late-twentieth-century lawyers, first, seek the abandonment of the property construct itself because they believe it places needless restrictions on securities transfer and capitalist expansion and, second, redefine the subject of property not as the bearer of rights but as a risk profile subject to the disciplinary practice of insurance. At stake is not merely a new definition of property but a new definition of personhood and a new form of governmentality. Rights and property give way to risk and insurance. This shift, I believe, has profound implications.
To understand the shift from rights to risk, it is useful to examine oscillations in the history of property, such as those between the canonical notions of property elaborated by Locke's Second Treatise and Hegel's Philosophy of Right; the nineteenth-century rejection of physicalist notions of property; the early-twentieth-century "realist" conceptions of property that undermined the nineteenth-century critique and set the stage for the modern system of securities trading based on paper shares; and the late-twentieth-century calls for the abandonment of the property construct altogether. Corresponding to these oscillations are shifts in governmentality, regimes of rule, and definitions of political subjecthood. Something is indeed new in contemporary capitalism, but it does not concern only the speed or volume of capital flows. At stake is redefinition of the core constructs of capitalism itself.
Securitization and securities clearance allow the convertibility of objects of property into objects of capital and back again. Such convertibility is integral to capital mobility. Briefly, securitization and securities clearance involve a set of technical and procedural norms that make possible equivalencies among objects of property by rendering these objects into the same kind of thing-abstractions of value embodied in imaginary shares. Although the extrapolation of shares from physical or intangible objects may not seem like a big deal, the technical and procedural norms involved in securitization are not simple matters. For example, the World Bank reports that a main difficulty of financing businesses in so-called transitioning economies stems from international lenders' unwillingness to accept certain kinds of collateral from potential borrowers-specifically, "movable" property held by the prospective borrower (things like factory machinery or inventories). "Rather," the Bank writes, "lenders require that the moveable property be placed under their direct control-as if they were valuables in a bank vault or goods in a bonded warehouse," as if a farmer would give a bank his cows as collateral, and the bank would put the cows in its own corral somewhere. The World Bank asks, "Why is real estate or merchandise in a vault acceptable as collateral, but not livestock, machinery, and inventories?" To solve the problem, the Bank proposes the development of legal regimes that permit the "creation of security interests for any person over any thing," so that lenders could simply hold securitized interests in movable property against borrowers' loans instead of warehousing the property itself. Securitization, thus, is not obvious or self-evident; it often must be imposed.
What is securities clearance? Briefly, securities clearance is the process by which orders for stocks are matched to issuing parties. Assume a person wishes to purchase 1,000 shares of IBM stock and that another has 1,000 shares to sell. The first person's broker places an order for the shares through a national clearing system, which locates the seller and matches the order to the seller's account with her broker. Essentially, securities clearance is the process that ensures that buyers and sellers can "meet" each other, make promises to trade securities, and, finally, carry out those promises. Securities clearance is the space of "the market," the imaginary meeting ground of contemporary capitalism. Securities settlement is the process by which property interests in a set of securities are transferred from one legal person to another. As a securities lawyer puts it, "Clearance and settlement comprise the process whereby securities market participants consummate their agreements to buy and sell securities. . . . The buyer pays the seller, and the seller 'delivers' (transfers a property interest in) the securities."
Contemporary securities clearance hinges on the principle of "negotiability" of paper shares. The fact that shares have been pieces of paper leads to troubling distinctions in the law of negotiability between the symbolic and the real, distinctions contemporary securities lawyers seek to move beyond. A negotiable instrument is any instrument that can be transferred to another party by "endorsement" or "delivery": by either signing it over (a "symbolic" transfer) or actually moving it (a "physical" transfer) to the other party. Because of the reliance on negotiability as a means of transferring property rights in securities, and in spite of new technologies that seem to render paper securities obsolete, a reification of the security has come about: The security has become an "it" to be transferred or endorsed, and securities clearance has henceforth come to imply a physical thing, the paper stock certificate. Contemporary securities lawyers decry this reification and argue for a system of totally paperless trading. But to understand the reification of the security and current arguments to deconstruct it, we must go back to conceptualizations of property that set the stage for the legal apparatus that securities lawyers now seek to undo.
The complete essay appears in Public Culture 11.2
Bill Maurer teaches anthropology at the University of California, Irvine. His recent publications include Recharting the Caribbean: Land, Law and Citizenship in the British Virgin Islands (University of Michigan Press, 1997).