The Future of FX Markets – Update October 2019

The Future of FX Markets – Update October 2019

 

This is the biggest financial market trading currencies worth USD 6.6 trillion every day

There are two segments of the FX market

  • Spot Trading
  • FX Swaps, Options, and Derivatives Market

Spot trading market is OTC.

FX Swaps, Options, and Derivatives market is changing rapidly.

There two main features of these changes.

  • Mergers and Acquisitions in Trading platforms
  • Move of OTC FX trading to exchanges

I have tried to highlight many of these changes below.

Mergers and Acquisitions  in Trading Platforms

  • 2012 Reuters acquires FX ALL
  • 2014 ICAP combines EBS and BrokerTec
  • 2015 BATS global matkets acquires Hotspot FX
  • 2015 360T was bought by Deutsche Börse
  • 2017 CBOE Global Matkets acquires Bats Global Markets
  • 2018 CME Group acquires NEX
  • 2018 360t acquires Gain GTX

 

Leading electronic FX players:

  • CME,
  • EBS,
  • Reuters,
  • FXall,
  • FX Connext/Currenex,
  • Hotspot FXi,
  • LavaFX,
  • 360T
  • MilanFX, and
  • FXMarketSpace.

 

https://www.fnlondon.com/articles/best-foreign-exchange-trading-platform-the-nominees-20170329

Best Foreign Exchange Trading Platform: The Nominees

The 2017 winners will be announced at a gala event on May 25 in London at the V&A Museum

By Joel Clark

Updated: April 3, 2017 4:14 p.m. GMT

The 2017 winners will be announced at a gala event on May 25 in London at the V&A Museum.

Here are the nominees for: Best Foreign Exchange Trading Platform

360T
360T has been a reliable FX platform for institutional asset managers and corporates since inception in 2000, but its acquisition by Deutsche Börse in 2015 has given it increased firepower. With offices in Frankfurt, New York, Singapore, India and Dubai, the platform has 1,600 users globally and sources liquidity from 200 providers. The business is managed by long-time chief executive Carlo Kölzer, now also Deutsche Börse’s head of FX. It made several senior hires in 2016 to strengthen its sales effort in the US and Nordics. Most recently, industry veteran Simon Jones joined as chief growth officer and board member.

EBS BrokerTec
Part of Michael Spencer’s NEX Group, EBS’s average daily volume in 2016 was $85.8 billion, down nearly 10% year-on-year, but it bounced to $93.2 billion in January 2017. The pace of change may have slowed after chief executive Gil Mandelzis left in 2016, but EBS remains the market’s primary trading platform for major currencies. Under new CEO Seth Johnson, it introduced EBS Live Ultra, a faster data feed that updates price at intervals of either 100 milliseconds or 20 milliseconds. An upgrade in February offers a five millisecond feed, reducing reliance on the controversial practice of “last look”.

FastMatch
FastMatch, which was founded in 2012, aims to provide the fastest access to reliable FX liquidity using the same technology that underpins Credit Suisse’s Crossfinder matching engine. Average daily volume reached $12.7 billion in 2016, up from $8.4 billion in 2015. FastMatch traded $39.8 billion on June 24 and $38.0 billion on November 9, following the Brexit vote and US elections respectively, putting it on a par with established platforms that often see a spike in volume at times of market stress. The platform made its proprietary algorithmic and transaction cost analysis services available to all subscribers last year.

FX Connect
The State Street owned business has existed since 1996 and sources liquidity from more than 60 firms, including both top-tier banks and regional specialists. Of the largest 50 global asset management firms, State Street estimates that 47 use FX Connect. The platform saw a peak day on June 30, 2016, in the aftermath of the Brexit vote, when FX trading volumes exceeded $400 billion, with more than 47,000 transactions processed. FX Connect supports a range of execution methods, including relationship-based request-for-quote, request-for-stream, voice trading and algo execution services.

FXSpotStream
Led by chief executive Alan Schwarz, bank-owned FXSpotStream has become an enduring presence in the rapidly changing FX market. With an average daily volume of $18.2 billion in 2016, and significant year-on-year growth reported in seven out of 12 months, the platform is attracting a growing pool of liquidity. FXSpotStream does not charge brokerage fees to either clients or liquidity providers. With liquidity provided by 12 global banks – double the number it had had when it started out in 2011 – the business now has offices in London, New York and Tokyo.

Hotspot
Turnover on institutional FX platform Hotspot has remained resilient in the past year, with an average daily volume fluctuating between $29.4 billion in the first quarter of 2016, $25.7 billion in Q3 and $26.7 billion in Q4. Since its acquisition by Bats Global Markets in 2015, Hotspot has launched a UK matching engine, developed trading in outright deliverable forwards and launched Hotspot Link, which allows clients to design their own relationship-based liquidity pools. The platform grew its market share from 11.5% to 12.5% last year, according to Bats. Hotspot recently hired Matt Vickerman from Sun Trading and Rahul Bowry from Markit.

JP Morgan Markets
While some of its competitors have pulled back, JP Morgan has continued to invest heavily in its electronic platform and has achieved significant growth in activity on eXecute, the FX and commodities trading platform on JP Morgan Markets. By December 2016, the average number of daily users trading on eXecute had increased 43% year-on-year. Mobile usage had increased by 23% year-on-year, while the biggest trade on a mobile device stands at $100 million. JP Morgan has set aside $100 million to further develop its electronic offerings this year.

Thomson Reuters
Thomson Reuters’ FX platforms support a combined average daily trading volume of $350 billion, representing a substantial chunk of global market turnover. FXall, the dealer-to-client platform acquired by Thomson Reuters in 2012, has 1,700 institutional clients and 160 market makers. The company’s interbank platform, Thomson Reuters Matching, is a key trading venue for commonwealth currencies, and average daily spot volume across venues averaged $100 billion in 2016. Thomson Reuters introduced a new high-speed data feed in 2016 to deliver faster price updates and is partnering with analytics provider BestX to deliver independent trade analysis to clients.

For queries and general information regarding our gala event, please contact: awards@fnlondon.com

 

 

https://www.fnlondon.com/articles/best-foreign-exchange-trading-platform-2018-the-nominees-20180327

Best Foreign Exchange Trading Platform 2018: The Nominees

The winners of FN’s Trading and Technology Awards will be announced at the V&A Museum in London on May 15

Our awards are independent and fee-free. The Financial News editorial team compiles a shortlist of five nominees in each category following extensive research, taking soundings from industry contacts, and reviewing data and industry information.

The winners will be announced at the 16th annual awards gala dinner to be held at the V&A Museum in London on Tuesday, May 15.

Here are the nominees for: BEST FOREIGN EXCHANGE TRADING PLATFORM

Cboe FX
In spite of multiple changes of ownership over the past three years – from KCG to Bats Global Markets to Cboe – the platform formerly known as Hotspot has gone from strength to strength, with an average daily volume of $29.5bn in 2017, up nearly 10% year-on-year. In the fourth quarter, its market share averaged 14.9%, up from 12% in 2016. Given the fragmentation of liquidity, that is a sizeable chunk of the global FX market. In May 2017, Hotspot launched outright deliverable forwards on the platform while non-deliverable forwards were launched on Cboe SEF, the exchange’s registered swap execution facility, in December. The Hotspot business has now been rebranded as Cboe FX and is led by Bryan Harkins, Cboe’s head of US equities and global FX, while Jon Weinberg was hired from UBS last year as head of FX liquidity analysis.

Currenex
Ten years after buying Currenex in a landmark deal for the sector, State Street has continued to invest in the platform and it remains a leading liquidity pool in the FX market. In readiness for the EU’s revised trading rulebook under the Markets in Financial Instruments Directive, State Street last year launched the Currenex Multilateral Trading Facility to enable clients to use a disclosed request-for-quote model for FX spot, swaps, forwards and non-deliverable forwards. The platform’s trading volume are not disclosed, but Currenex remains a significant pool of FX liquidity. It is supported by a range of market data services, including streaming tick data on 40 currency pairs as well as well as a 100-millisecond snapshot of aggregated top of book price data. Last year, State Street hired James Reilly from Cantor Fitzgerald as global head of Currenex.

FastMatch
Amidst a spate of FX platform launches in recent years, FastMatch has emerged as one of the most successful, achieving an average daily volume of $18.4bn in 2017, up from $12.7bn in 2016. Average daily volumes spiked to a record of $22.5bn in May 2017, putting FastMatch firmly into competition with more entrenched players. In August 2017, exchange operator Euronext acquired the platform as a means of expanding into the FX market, which has in turn allowed FastMatch to push into the real money space in Europe. Additional highlights of 2017 included the opening of a sales office in Connecticut to complement its offices in New York, London and Moscow, and the launch of FX Tape, a market data service intended to act as a central reference point for transacted prices in spot FX.

NEX Markets
NEX Markets, previously EBS BrokerTec before Icap sold its voice broking unit and rebranded as NEX Group, recorded average daily FX volumes of $82.6bn last year. This may be a far cry from its heyday in 2008 when EBS hit an average of $214bn, but the FX market has changed since then and liquidity is now far more fragmented. With 2,800 customers in 50 countries, EBS remains the benchmark in major currency pairs such as EUR/USD and USD/JPY. The EBS Live Ultra data feed was enhanced last year to deliver spot FX data at five-millisecond intervals in response to client demand, while NEX Quant Analytics, a newly launched service that allows clients to analyse their performance and conduct regular reviews has proven particularly popular. EBS revenue for the half year ending September 30 2017 was £75m, up 12% year-on-year, highlighting the success of its diversified product offering.

Thomson Reuters
This year got off to a flying start, with trading volume across the Thomson Reuters Matching and FXall platforms reaching record highs in January 2018, suggesting not only that FX volatility had picked up, but also that diligent preparations for Mifid II had paid off. Average daily volume for all products reached $432bn, including $107bn for spot only – a level not surpassed since June 2016. Enhancements were completed in July 2017 to allow European clients to continue using the platforms for FX products under Mifid II and further changes were made to the company’s multilateral trading facility in December to support FX derivatives. In January, Thomson Reuters hired Jill Sigelbaum from NEX Traiana to head FXall, the ever popular institutional platform that it acquired in 2012.

Methodology
Financial News’s awards are independent and fee-free. Nominees in each category are voted on by a distinguished, independent panel of industry practitioners who cast their vote electronically. Each judge awards a score out of five to each nominee. The results are then vetted by FN editors for conflicts of interest. The highest adjusted average score out of five is the winner.

For all editorial inquiries please contact, Financial News projects editor Juliette Pearse at juliette.pearse@dowjones.com.

If you are interested in sponsorship opportunities or would like to book a table at the awards dinner on May 15th please contact: awards@fnlondon.com.

 

BATS increases its institutional platform portfolio, first Hotspot FX, now ETF.com

BATS increases its institutional platform portfolio

Just who is forging ahead in the very competitive institutional ECN sector? It is a very close battle of the…

BATS increases its institutional platform portfolio

Just who is forging ahead in the very competitive institutional ECN sector? It is a very close battle of the titans….

Yesterday, exchange operator BATS Global Markets announced it was buying ETF.com, without disclosing the financial terms of the transaction, in a deal which is expected to close in April 1st.

The ETF.com website which generated 875,572 page views and attracted 291,191 unique visitors in February 2016 will become an independent media subsidiary of BATS Global Markets.

David Lichtblau, CEO of ETF.com, will remain in that role and report directly to Bats Executive Vice President and Head of U.S. Markets Bryan Harkins.”, said the press release, underscoring “our commitment to the ETF industry and our focus on providing unique, value-added content for issuers, brokers, financial advisors, market professionals and investors.”

Bats has been expanding its ETF business, doubling the number of ETFs listed on the US market to 56 as the Kansas-based firm offered to pay ETF providers as much as $400,000 to list on its exchange, since 2015.

On Monday, the company announced it would provide Money.com with Bats One Feed, a market data product that handled 26.2% of all ETF trading in February 2016.

In 2015, BATS Global Markets, Inc. Class A Common Stock (BATS:BATS) decided to expand into the foreign exchange market by buying currency-trading venue Hotspot FX from KCG Holdings Inc. in a $365 million deal in cash and additional payments under a tax sharing arrangement of $63 million, apparently valuing the company 14 times the EBITDA in 2014. HospotFX has a network of more than 30 prime brokers and an average daily volume over $30,000 billion in 2016.

Multi-asset institutional platforms have been dominated by EBS (ICAP) and Thomson Reuters who compete at almost level pegging volume wise for 3 years.

Thomson Reuters bought FXall for $625 million in 2012, having published its average daily spot volume at $111 billion in a total volume of $356 million in February. At the time, FXall CEO Phil Weisberg became Global Head of eFX for Thomson Reuters, a position he continues to hold today.

Electronic Broking Services (EBS) which is the institutional ECN division of British interdealer broker ICAP Plc (LON:IAP) and is one of the largest dealing platforms, continues to hold its level pegging with FXall on a monthly basis, with average daily volumes in February 2016 coming in at $102 billion, and daily average of $107 billion in 2015, down from $274 million in 2008.

ICAP’s decision to bring EBS under the same roof in late 2014, combining its EBS foreign exchange and BrokerTec fixed income electronic trading platforms into one business unit, might have been the force behind Bats buying Hotspot FX, in a business environment where mergers and acquisitions are in fashion. Consolidation is the new big thing among institutional giants, now the other “big four”: Thomson Reuters, ICAP, BATS and KCG.

No.2 US exchange operator by volume, BATS expanded beyond equities and into foreign exchange and ETFs, aggressively trying to win market share. After a failed attempt to file an IPO in 2012, due to a glitch in the company’s trading systems, BATS is planning to file one in 2016, valuing the firm at $2 billion despite equity’s valuation at $1.5 billion.

This acquisition, when looking at the closely-contended institutional ECN sector, is a case of BATS Global Markets sharpening its bow as the battle for supremacy in this particular sector continues not only to be a four horse race, but a very marginal one at that.

Photograph: Time Square, New York. Copyright FinanceFeeds

#BATS, #etf.com, #hotspotfx, #institutional, #platform

 

Clearing of FX

  • CME Group
  • LCH
  • Eurex Group

 

 

https://www.euromoney.com/article/b12kp3zljw20cj/otc-fx-trading-becomes-exchange-like

OTC FX trading becomes ‘exchange-like’

Exchanges and the over-the-counter (OTC) market might have moved a little closer in recent years, but it is far from inevitable that demand for greater trading clarity will push a sizeable chunk of the market away from OTC.

The acquisition of trading platforms Hotspot and 360T by Bats Global Markets and Deutsche Börse respectively last year were bold statements of intent by exchange operators to grab a larger chunk of the trillions of dollars traded in FX every day.

However, while consolidation in the venues supporting FX trading can be expected to result in exchanges becoming more involved in the FX space, any actual market structure change is likely to take a long time to materialize, according to FXSpotStream CEO Alan Schwarz.

“The FX market continues to do a good job of addressing regulatory requirements and meeting the demands of market participants,” he says.

“We have seen a shift in the FX market looking to trade more on a disclosed basis. Our business has continued to see year-on-year growth because there is a move taking place from exchange-like anonymous trading to bilateral, fully disclosed trading between counterparties.

“Unlike trading on an exchange, the relationship via FXSpotStream is transparent and trading with the liquidity providing banks is on a fully disclosed basis.”

Nuances

Kevin McPartland, head of market structure and technology research at Greenwich Associates, believes that discussion of migration from OTC to exchange fails to take account of some of the nuances of the FX market and that the future lies in venues that support multiple trading models.

“There are a host of non-exchange electronic trading venues that allow clients to trade with each other in a variety of ways,” he says.

Kevin_McPartland-160x186
 

On the question of whether there is a discernible shift towards fully disclosed trading, McPartland refers to both central limit order book (CLOB) and request-for-quote (RFQ) having their merits.

Despite observations made by the likes of TeraExchange – that order book platforms offer a democratic marketplace through transparent, firm and executable prices – corporates have remained reluctant to abandon the RFQ model.

The key question for CLOB platform providers continues to be not why market participants have migrated to alternative models but rather when they will be in a position to win new business for products that are most suited for order books, such as the benchmarks and plain vanilla products.

“RGQ offers liquidity on demand and identification of counterparties, whereas CLOB is faster and its anonymity can be helpful,” says McPartland.

“But we are now seeing demand for a solution that provides the best of both worlds by enabling trading in an order book format while maintaining a bilateral relationship with counterparties.”

Regulation

According to James Sinclair, CEO of MarketFactory, options and other derivativesare moving closer to an exchange model due to the direct effects of regulation and the increased costs of compliance in OTC markets.

He refers to CME FX options as an example, noting they are effectively options on futures.

“However, the situation in the spot market is more complicated – some aspects are becoming closer to an exchange, others are moving further away,” he says. “FX has its own market structure that is hard to fit into the OTC/exchange paradigm.”

James Sinclair 2-160x186
 

One of the fundamental reasons why the market does not become centrally cleared, says Sinclair, is that a cleared model carries the cost of insurance against both settlement and market risk.

“CLS insures you against settlement risk but not the market risk,” he adds. “Counterparts still find it cheaper to self-insure against market risk in case of a counterparty default than to pay the extra cost of a fully cleared solution.”

A senior platform source observes that growth in exchange-traded products has largely come from futures traders who have looked for diversification and added FX as another asset class.

“Very little business has moved from OTC – some banks have added exchanges as additional liquidity sources to cover risk, but that is really the only business that has crossed the divide,” the source says.

OTC has become more exchange-like in that the largest banks have continued to extend their internalization of flow, so each now runs an order book trading structure internally.

However, our source also points out that the tightening of credit has reduced the number of prime brokers in FX and costs have risen “so the nearest thing that the FX OTC market has to centralized clearing has actually reduced its volume and capacity”, he concludes.

 

 

 

https://www.reuters.com/article/markets-forex-regulation/pressure-builds-to-move-more-fx-trading-onto-exchanges-idUSL5N0VJ1VU20150216

Pressure builds to move more FX trading onto exchanges

LONDON, Feb 16 (Reuters) – International regulators struggling to rein in the $5 trillion-a-day global foreign exchange market are finally finding some support from asset managers warming to the idea of moving more trading onto exchanges.

The juggernaut forex market operates 24 hours a day across all time zones, but unlike with shares or commodities, trading is not centralised, potentially leaving space for malpractices.

This has gone largely unremarked for years. But a global investigation into market-rigging, allied to post-2008 regulation which has raised trading costs, has prompted more fund managers to ask if they are getting a fair deal from banks.

Advocates say putting forex trading on to exchanges would increase transparency, limit the scope for manipulation and benefit consumers. That would all come at a cost that now looks less of an issue than it did even two years ago.

“We are talking to people who are planning to shift 10-20 percent of their portfolios to some form of exchange-based or cleared trading if only to see how it goes,” said Peter Jerrom, who has launched a new broking operation matching orders for certain types of derivatives at London-based Sigma Broking.

“There is a shift that is a reflection of how much people have become tired of a variety of issues with the banks.”

BATS Global Markets’ purchase of FX trading platform Hotspot last month and moves by NASDAQ and Eurex into the sector, as well as the growing role of commodities and futures exchange CME Group in FX dealing suggest the move is gathering momentum.

Straightforward spot trading, worth roughly $2 trillion a day, will almost certainly continue to be done ‘over the counter’, with participants dealing directly with one another by phone or electronically.

But the growing costs of trading derivatives and options means anything from 20 to 60 percent of the market will be up for grabs in the next few years.

“All of the big exchanges are looking at this space now,” said David Mercer, chief executive officer of LMAX, a “multilateral trading facility” (MTF), to all intents and purposes the world’s only regulated currency trading exchange.

The head of business development with another major exchange added: “It is clear to us that our clients want trading on exchanges. But they do not want all trading on exchanges.”

DON’T BANK ON IT

Alfred Schorno, managing director of FX trading platform 360 Trading Networks said the critical issue was increasing transparency rather than necessarily moving to exchanges.

Calls for clearer structures reached a crescendo last November, when a year-long global investigation into allegations of collusion and rigging culminated in multi-billion dollar fines for six of the world’s biggest banks.

The threat of further fines for the banks from the European Union remains, while the U.S. Department of Justice and Britain’s Serious Fraud Office are still pursuing criminal investigations.

One issue is that forex dealing is concentrated in relatively few hands, with just five banks accounting for more than half of all the trade. Understandably, they are reluctant to loosen that grip.

“The big platforms have a difficult choice to make. Faced with more regulation, if they favoured a move to exchanges, they might well be the biggest players – or at least from a manager’s point of view might be bought well by one of them,” a senior industry source said.

WTO warns of global trade slowdown as indicator hits 9-year low

“But the banks would go mad if they said that publicly so they have to keep quiet,” he said.

Britain’s Conservative-led coalition government has pushed the bigger issues of the structure of the FX market back until after May’s general election.

But with some 40 percent of global currency trading flowing through London every day, the Bank of England’s Fair and Effective Market Review recommendations, not expected out until June, will be an important sign of things to come.

The industry contact panel for the review is, notably, chaired by the head of one of the world’s biggest asset managers, Allianz IG’s Elizabeth Corley. She declined to comment for this article.

ROUBLE RUCTIONS, FRANC FALLOUT

One driver for the move to more regulation is the market’s sheer size. It is by far the world’s largest single financial market, backed by central bank balance sheets that have swollen by some $10 trillion since the 2007-08 crisis and global foreign exchange reserves that now stand at $12 trillion.

Switzerland’s shock removal of its cap on the Swiss franc on Jan. 15 helped drive a record 2.26 million transactions, worth $9.2 trillion that day. On Dec. 17, as Russia’s rouble crumbled along with oil prices, volumes hit a record $10.67 trillion.

While various financial centres have developed voluntary codes of conduct for FX trading, they are not legally binding. In FX, unlike on the stock market, short-selling or betting on a fall in the price of an asset is virtually unrestricted.

Spot trading is hardly regulated at all. Traders dealing tens of billions of dollars a day are not required to be on the UK Financial Conduct Authority’s register of approved persons.

But that leaves some $3 trillion of FX options, swaps and derivatives trading, which regulators have moved to push towards formal clearing. (Editing by Hugh Lawson)

 

From https://www.dummies.com/education/finance/international-finance/an-overview-of-foreign-exchange-derivatives/

An Overview of Foreign Exchange Derivatives

By Ayse Evrensel

In international finance, derivative instruments imply contracts based on which you can purchase or sell currency at a future date. The three major types of foreign exchange (FX) derivatives: forward contracts, futures contracts, and options. They have important differences, which changes their attractiveness to a specific FX market participant.

FX derivatives are contracts to buy or sell foreign currencies at a future date. The table summarizes the relevant characteristics of three types of FX derivatives: forward contracts, futures contracts, and options. Because the types of FX derivatives closely correspond to the identity of the FX market participant, the table is based on the derivative type-market participant relationship.

An Overview of the Relevant FX Derivatives
Forward Contracts Future Contracts Options
Standardized regarding the amount of currency No Yes Yes
Obligation to engage in the transaction on the specified
day
Yes Yes No, but premium must be paid
Traded No CME Group GLOBEX
OTC
CME Group
GLOBEX
ISE
OTC
Useful for MNCs Yes Yes Yes
Useful for speculators No Yes Yes

CME Group: the leading derivative exchange formed by the (2007) merger of the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOT); GLOBEX: an international, automated trading platform for futures and options at CME; ISE: International Security Exchange, a subsidiary of EUREX, a European derivative exchange; OTC: over-the-counter.

https://www.cls-group.com/products/settlement/clsclearedfx/

CLSClearedFX is the first payment-versus-payment settlement service specifically designed for over the counter (OTC) cleared FX derivatives. The service enables central counterparties (CCPs) and their clearing members to safely and effectively mitigate settlement risk when settling cleared FX products.

The service delivers capital, margin, leverage, liquidity and operational benefits for industry participants, and is consistent with goals set by the G20 in response to the global financial crisis to mitigate systemic risk through the clearing of standardized OTC derivatives.

https://www.clarusft.com/fx-clearing-the-750bn-market-that-keeps-growing/

FX Clearing – the $750bn market that keeps growing

  • LCH ForexClear continues to dominate the cleared NDF market.
  • CME have recently announced that 7 market participants intend to clear NDFs across their service next year.
  • We look at the CME’s existing volumes in FX futures.

FX NDF Clearing Update

When we last looked at NDF Clearing in June 2017, we saw that LCH were dominating volumes. Open Interest had risen to $600bn+ and monthly volumes were up over $400bn, with March 2017 pushing $500bn. Has anything changed since? Amir provided an update for September, and bringing this up-to-date via CCPView shows:

NDF Notional Outstanding

Showing;

  • LCH ForexClear continues to dominate NDF clearing. 92% of notional outstanding is at LCH.
  • Total Notional Outstanding of cleared NDFs has now surpassed $750bn – both in total and at ForexClear alone.
  • Growth since the beginning of 2017 has been impressive, with Open Interest basically doubling (it is 1.88 times higher now than end of December 2016).

And in terms of monthly volumes, October 2017 was near to the records set in September. The weekly time-series of volumes shows a steady upwards trend:

Weekly Cleared NDF Volumes
  • The biggest week was the end of September, when $184bn cleared in total.
  • There have now been four weeks when total clearing volumes have topped $150bn.
  • Our disclosures data shows that the number of participants at LCH ForexClear have increased over the past year. We started at 25 in Dec 2016 (23 of whom were banks), and we were up to 27 as at end June 2017 (our latest data point).

As a reminder, this move to NDF Clearing appears to be a post-trade process. We still see less than 4% of volumes reported to SDRs flagged as “Cleared”. Actual market take-up is much larger than this (about 20% of the total market is cleared and 35% of D2D markets according to our last estimates) – but the trades are novated to clearing after trading, and hence do not appear to be cleared in public trade reports.

FX Futures

Elsewhere in FX markets, CME recently announced a new “FX Link” product:

CME FX Link

This obviously piqued our interest at Clarus – we like innovation, we are keen followers of the FX market and we are continually looking at ways that volumes may move across OTC and Futures products. This new product ticks a lot of those boxes!

Add in the fact that EMIR brings VM to FX Forwards next year, and this product is one we will watch closely. If counterparties can bring in multilateral netting benefits of clearing to any of their OTC business, it may lessen the funding impacts from having to post VM on FX.

In terms of the product itself, I understand this to be the concurrent buy and sell of OTC Spot versus an FX Future at CME. As well as managing VM in a UMR world, this product offers the same exposures to risk factors as an OTC FX Forward – interest rate differentials between two currencies, very short dated cross currency basis exposure – but could allow users to manage OTC credit and settlement exposures by using a future for the long-leg.

For CME, I imagine transferring as much liquidity as possible from the OTC space to the futures space is important. Therefore, using Quandl, I had a look at FX futures volumes recently:

Daily FX Futures volumes in EURUSD. Data from quandl.com

Showing;

  • Number of contracts traded in the front EURUSD FX Futures contract every day since June.
  • Volumes have been very stable.
  • The rolling ten-day average (the orange line) shows anything between 150-250,000 contracts trade each day. Multiply by EUR125,000 notional value tells us we have a notional equivalent volume of around €25bn.
  • Bloomberg frequently call the FX market a “$5 trillion” market:

  • That number comes from the BIS Triennial Survey, which we’ve analysed in plenty of detail in the past.
  • In that BIS survey, we see an average daily volume for EURUSD spot of ~$500bn. If we treat the CME future as a spot-like product (because it trades on an outright basis and I imagine is largely used for price risk transfer) then about 5% of spot-market equivalent volume occurs in futures markets.

It will be an interesting one to watch. Our chart suggests volumes in FX Futures have been fairly static recently. Will this new product shake things up?

NDF Clearing at CME

That was going to be that before I saw another release from CME this week:

I’ve not got too much to add to the press release apart from;

  • Cross-margining versus Non Deliverable IRS will be offered. This is interesting as I do not think that LCH cross-margin ForexClear versus SwapClear (let me know if you think different in the comments). On the LCH 2017 roadmap, non deliverable swaps should soon be available at SwapClear (Q4 2017).
  • It is not clear if these members are new members or are existing clearing members at CME. Our Disclosures data (identified as “CME IRS” ) shows that CME had 23 clearing participants at end June 2017.

We will be keeping a keen eye in Q1 2018 for these volumes coming through into the CME service. Make sure to subscribe to stay on top of these market trends.

In Summary

  • Open Interest in Cleared NDFs has surpassed the $750bn mark.
  • LCH dominate NDF clearing at the moment, with up to $150bn in notional volumes trading each week.
  • CME will be bringing more competition to NDF clearing in 2018 with seven participants intending to clear.
  • CME already have a successful FX franchise, with EURUSD FX Futures accounting for around 5% of spot market volumes.
  • CME are introducing an FX Link product in 2018 which will combine OTC spot and Futures contracts into a single executable spread.
  • Clarus data helps market participants stay on top of these trends by showing where volumes are traded.

Stay informed with our FREE newsletter, subscribe here.

https://www.thetradenews.com/eurex-to-launch-otc-fx-clearing-service/

Eurex to launch OTC FX clearing service

Eurex will look to open up competition for clearing OTC FX derivatives in Europe.

 

Eurex will begin clearing OTC FX derivatives following the launch of new systems changes to clearing swaps, as it looks to compete in new asset classes with LCH.

Eurex Clearing is cooperating with 360T to introduce clearing on OTC FX swaps, spots and forwards in EUR/USD and GDP/USD, with CLS acting as the settlement agent.

According to a circular from the Frankfurt-based exchange group, it plans to launch the service after it goes live with a series of changes to EurexOTC Clear on 15 May. It currently provides clearing for FX futures and listed options.

The move will open up competition in the FX swaps market, with London-based LCH currently operating the only clearing service for OTC FX derivatives in Europe. So far this year LCH has cleared over 128,000 contracts with a notional volume of $2.9 trillion.

According to data from ClarusFT, over a third of dealer-to-dealer volumes were cleared in the non-deliverable forwards market at the end of last year.

Previous reports have suggested LCH is looking to launch an OTC FX options clearing service. Meanwhile CME Group has said it will expand its cleared FX suite this year by offering FX options on seven main currency pairings.

Tagged: , ,

https://www.bestexecution.net/360t-future-fx-david-holcombe/

360T : The Future of FX : David Holcombe

THE FUTURE OF FX: EXCHANGE TRADED AND OTC LIQUIDITY?

Best Execution talks to David Holcombe, Product Lead for FX Futures and Clearing, 360T

Is the FX market really heading towards being an exchange traded and centrally cleared market?

This isn’t an all or nothing point in either direction. One size does not fit all in the FX market. The Deutsche Boerse Group FX strategy is actually a good view of the end state of the FX landscape – where informed clients will establish whether to clear any given trade, then use the right tools to achieve that.

When will that be? Cleared and exchange traded FX is still a small fragment of the overall FX market, so surely that “end state” view is still many years away?

My role is to ensure 360T exploits tight integration between 360T, the Eurex Exchange, Eurex Clearing and other group entities to create a truly front-to back FX offering for our clients that covers Exchange and OTC FX liquidity. We haven’t made a public song and dance about this, but this integration really is very well advanced, and you will see FX futures traded via 360T in the first quarter of 2018.

Beyond tools to let our clients choose the right FX product for the trade they need to do, using the right execution model, and the right credit and clearing model to exploit all the benefits available, the challenge the industry faces right now is to understand what clearing means, and what it can do for them.

OK, so if clearing is the start point for all of this, how do I know whether to clear something?

It’s actually a complex consideration. We’ve had a specialist consultancy in to prepare analysis to quantify the benefits of central clearing for FX, as in the absence of clearing mandates, the decision process to clear needs to consider multiple attributes for any given scenario. With so many moving parts as variables in the model, we are now going through these results with clients individually, offering to put their sample portfolios through our modelling tool to see where they will gain.

Ultimately though, one has to understand what the real drivers for each trade are, and also to consider the full impact that the trade will have on the portfolio in each form it could take, in order to then make an informed decision of how and where to get the best trade done with the best outcome.

So, once you need to clear, how do you choose between OTC executed flow or exchange products?

While the use of exchange listed products amplifies the benefits of clearing, the answer is still pretty much down to product access and liquidity.

It’s understandable that OTC execution is a place many start when considering clearing, because exchange-traded FX has never really been centre stage in the FX market. The majority of our clients being real FX participants state that a market built on the foundations of “how much and who’s asking”, with a myriad of ways in which LPs and clients can meet to bilaterally negotiate and trade OTC FX, have meant the US-focused exchange offerings, with limited value dates and product flexibility, have always been too far away from being a good fit for their needs.

Also, it is fair to say that trading on an exchange platform doesn’t suit everyone, and clients with strong relationships that have historically served them very well, particularly in bilateral disclosed models, are understandably inclined to favour those routes to interact with the market. This is the execution model you will see in our 360T Block and EFP network: access to FX futures, while trading using familiar OTC models and tools.

When OTC products are the right route though, the availability of a clearing service for the product you need is the first obvious consideration. While interdealer NDF clearing is pretty much routine now, no CCP has yet been able to satisfy the regulators that they are effectively managing the settlement risk they concentrate between members for deliverable OTC FX products, in order to address the bulk of the market’s ADV – deliverable Spot, Forward and FX Swaps. Deliverable OTC FX clearing will become a reality in 2018 though, as we are one of two major CCPs currently finalising a deliverable FX clearing service, with the Deutsche Boerse Group’s Eurex Clearing service being the only one focused on letting you clear FX Spot, Forward, FX Swap, alongside cross currency swaps.

Once you have determined the position is going to be cleared, then your focus should be whether listed or OTC products give you the best route to get that position into the clearing house, considering all liquidity available: in the exchange orderbook and off-book – exactly the model 360T has with support for OTC alongside exchange listed FX products.

Well that’s clear – the customer gets the choice of using an OTC or exchange FX product, and accessing those exchange products on or off the exchange orderbook, but surely the problem with listed FX remains – the products are not a particularly good fit for OTC users?

The uptake of FX futures will be helped by next generation products that evolve FX futures from the US contracts with a small number of infrequent value dates, to something closer resembling the flexibility of OTC products.

We do have classic shaped FX futures contracts, albeit with OTC characteristics like having the currency pair quoted the right way around for OTC users, but a perfect example of next generation FX is the Eurex Rolling Spot Future. This is the simplest way to get FX spot exposure into the CCP, using an exchange listed product designed with a focus on removing incumbent costs in OTC rolls, with multiple liquidity providers considering the exchange orderbook and also how they can use the 360T block and EFP functionality to increase their distribution.

With all of these points aligning, the future of FX is here. Giving the customer true choice of product, execution type, and credit/clearing model so they can exploit the benefits that clearing can bring is certainly a challenge, but all of the foundations are already there for this client choice to become a reality in 2018 within 360T and the Deutsche Boerse Group.

http://www.360t.com

https://marketvoice.fia.org/issues/2017-12/cme-vs-lch-take-twoCME vs. LCH: Take Two

CME reinvigorates NDF clearing service in battle with LCH’s ForexClear

By

Nicola Tavendale

CME Group is making another run at the OTC FX market. The Chicago-based market operator recently unveiled an agreement with seven leading liquidity providers to begin using its clearing service for non-deliverable forwards and redoubled its efforts to promote the capital efficiencies that clearing can provide for FX traders. But with LCH currently dominating NDF clearing, is there really enough demand for the CME solution?

Over the last two years, NDF clearing has exploded as margin requirements for uncleared derivatives have come into effect around the world. Banks seeking to avoid those margin requirements have mainly turned to LCH’s ForexClear service, which provides clearing for NDFs in 12 emerging market currencies as well as several G-10 currencies. The service has 30 clearing members and has signed up an additional 3,000 client accounts this year alone. In the third quarter, the London-based clearinghouse processed NDFs worth $1.5 trillion in notional value, up more than 400% from the third quarter of 2016.

NDF Clearing Surges
Monthly Notional Value Cleared at LCH (Billions USD)

NoteMonthly clearing volumes include a small amount of NDFs in major currencies such as EUR, GBP, JPY and CHF. These NDFs make up less than 0.1% of total NDF clearing volume.
Source: LCH 

Virtually all interdealer activity resides on the LCH platform, explained John O’Hara, Americas head of prime brokerage and clearing at Société Générale Corporate and Investment Banking. But he said there is demand for a CME solution as well. One reason is the potential synergy with CME’s well-established foreign exchange futures market, which boasts more than $91 billion in average daily volume and more than $260 billion in open interest. “People gravitate toward what is most familiar to them, and for those actively clearing futures on CME, OTC FX clearing is a natural progression,” O’Hara explained.

CME has offered NDF clearing for several years but with minimal success. As of early December, across the 12 emerging market NDFs that CME clears, the only one with any activity was the Colombian peso NDF. The open interest in all of the others was exactly zero.

CME sees an opportunity for a second chance, however. So far most of the NDF clearing has been for interbank trades, but fund managers and other buyside institutions are poised to take up clearing as margin requirements for uncleared derivatives come into effect. CME is hoping that it can capture a share of this business by offering a clearing solution that combines OTC FX products with listed futures and options. Portfolio margining of OTC FX NDFs and listed FX futures is not available yet, but CME is working on getting regulatory approval and is hoping to bring that live in 2018.

Getting Market Makers on Board

The deeper challenge is pricing. Market sources said because ForexClear has been so widely adopted, liquidity in NDFs that are cleared at LCH are quoted with a tighter bid-ask spread than NDFs cleared at CME. CME is hoping to address that issue with its November announcement that seven leading NDF liquidity providers intend to start clearing with the service by the end of the first quarter of 2018. The seven liquidity providers are BBVA, Citi, Itau Unibanco, NatWest Markets, Santander, Standard Chartered and XTX Markets.

It is no accident that three of the liquidity providers—BBVA, Itau Unibanco, and Santander—are specialists in Latin American markets. Many of the most heavily traded NDFs are based on Latin currencies such as the Brazilian real and the Colombian peso. The other big center for NDFs is in Asia. That is one of the strengths of Standard Chartered, one of the top liquidity providers in Asian forex markets.

XTX is the only one of the seven that is not a bank, but the London-based electronic trading firm has emerged over the last three years as a major liquidity providers in the FX market. In last year’s Euromoney survey, which calculates market share across the top forex market-makers, XTX took third place in electronic spot trading in last year’s Euromoney survey of market share across the top FX market makers, and first place in this year’s FX Week awards for best liquidity provider.

All Under One Roof

CME also argues that its solution has a structural advantage. At LCH, the ForexClear service has its own default fund that is separate from its clearing services for other asset classes such as interest rate swaps. At CME, NDFs are under the same umbrella as a range of related products, including listed FX futures and options as well as interest rate swaps. That opens the door for margin offsets that LCH cannot offer. For example, CME estimates that the margin offsets between NDFs and non-deliverable interest rate swaps denominated in currencies such as the Brazilian real and the Korean won could go as high as 51%. The single default fund structure also offers capital savings for clearing firms. Rather than having to commit their capital to multiple default funds, the clearing firms only need to make one commitment that covers all the asset classes that they clear.

“Our NDF clearing solution leverages the same guaranty fund as the entire CME Group-listed futures and options complex, enabling material capital savings for our NDF clearing members and lower fees for customers clearing via an FCM,” Sean Tully, CME’s senior managing director of financials and OTC products, said in November when the agreement with the seven liquidity providers was announced.

Buyside Interest on the Rise

One of the key drivers behind the rise in demand for NDF clearing is the implementation of uncleared margin rules, which are still in the early stages of being phased in. Paddy Boyle, global head of ForexClear, explained that bilateral initial margin was initially required from all participants with at least $3 trillion of notional outstanding. That limit has now fallen to $2.25 trillion and will continue to fall to lower and lower thresholds. By September 2020, nearly all market participants will be subject to the rules.

“When we reach the final threshold in 2020, NDFs that are bilaterally traded and uncleared will become significantly more expensive and will provide all types of institutions with obvious greater incentive to clear,” Boyle said. Although most buyside firms are not yet subject to the margin requirements, Boyle said there is a “small but active group” of buyside firms voluntarily clearing NDFs at LCH now. “We expect buy-side clearing to grow substantially over the next few years, particularly as most buy-side firms will be caught as the thresholds continue to fall in 2019 and 2020,” he added.

“We expect buy-side clearing to grow substantially over the next few years, particularly as most buy-side firms will be caught as the thresholds continue to fall in 2019 and 2020.”

– Paddy Boyle, LCH

Basu Choudhury, head of business intelligence at NEX Traiana, also predicted that the buy side will soon have to start clearing more. Choudhury, who worked at ForexClear before joining Traiana in August 2016, explained that the first two waves of margin rules created an upturn in demand from tier one and tier two banks for NDF clearing. “Come January 2018, buy-side firms globally will also start to be impacted, so what CME are looking to do on the NDF side makes sense,” he said.

There is an added attraction for mutual funds in the U.S., according to SocGen’s O’Hara. “Since these fund structures have leverage and cash retention requirements measured on a gross notional basis when trading deliverable forwards, they have been seeking ways to ensure that there is no chance of delivery so their exposure can be assessed purely on a mark-to-market basis,” he explained. Since the CCPs have a mechanism wherein they can disallow delivery, they should be able to provide this relief, he said.

Convergence Play

Bringing liquidity providers on board is only one part of a renewed focus on the OTC FX market at CME. The company also is preparing to roll out a new service in the first quarter that will give OTC market participants better access to the liquidity in CME’s FX futures. Starting on Feb. 18, CME’s Globex electronic trading platform will support a central limit order book for trades that track the basis between spot FX and FX futures. This service, called FX Link, will enable the trading of an OTC spot FX contract and an FX futures contract via a single spread trade.

CME is partnering with Citi, one of the largest liquidity providers in the FX market, to act as central prime broker for the spot FX transactions resulting from the spread. The benefit of this arrangement, according to CME, is that it will allow participants to tap into their existing OTC FX interbank credit relationships and the established OTC FX prime brokerage network.

“By strengthening the integration between futures and the OTC FX marketplace, CME FX Link will enhance access to our deeply liquid FX futures market,” Paul Houston, CME’s global head of FX products, said in September when the initiative was announced. “OTC FX market participants will benefit from the capital and regulatory advantages of listed futures as well as optimizing credit lines through facing a central counterparty.”

“There will continue to be a convergence of sorts as OTC becomes more futures-like and futures assume some characteristics of OTC.”

– John O’Hara, Société Générale

In addition, both CME and ForexClear are preparing to launch OTC FX options clearing. CME said it is working with major FX options dealers to deliver a cash-settled clearing solution later this year, with the expectation of volumes beginning in early 2018. In contrast, ForexClear’s solution will offer physical settlement of OTC FX options in partnership with CLS, the widely used settlement service. ForexClear is currently seeking regulatory approval and plans to start by offering clearing in eight major currency pairs.

SocGen’s O’Hara explained that the options market has historically been characterized by physical settlement and many firms’ operational infrastructures have been built with this in mind. CME’s view, however, is that physical-settlement had become the standard simply as a consequence of how the market evolved and that cash settled would be the norm if it were starting today.

Ultimately the FX market is big enough to support both clearinghouses, according to Choudhury. “In IRS clearing we saw the buyside use CME initially while big dealers used LCH and it will be interesting to see if the same occurs with FX clearing,” he said. “CME do offer risk offsets between FX futures and OTC FX. For the buyside this may be attractive due to arbitrage opportunities, but dealers may prefer the LCH model due to larger netting pool.”

O’Hara commented that all of these moves are part of a larger trend that is blurring the lines between different sectors of the FX marketplace. “There will continue to be a convergence of sorts as OTC becomes more futures-like and futures assume some characteristics of OTC,” he said.

Other Topics

  • CME NDFs
  • Algorithmic Trading
  • High Frequency Trading
  • Global Code for FX Transactions

 

 

 

 

Please see my related posts

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360t.com

Cross Border/Offshore Payment, Clearing, and Settlement Systems -Update October 2019

Cross Border Payment, Clearing, and Settlement Systems -Update October 2019

 

There have been several new developments in Cross Border Payments Solutions landscape.

  • Interbank Cross Border Payments
  • Retail Cross Border Payments

 

Interbank Payments

  • Ripple
  • SWIFT
  • SWIFT GPI
  • JPMCoin
  • IBM Blockchain World Wire {BWW}

 

RIPPLE

From {https://digital.hbs.edu/platform-digit/submission/ripple-the-disruptor-to-the-forty-years-old-cross-border-payment-system/}

Cross-border payments today are inefficient, expensive and opaque.

The Global Interbank Financial Telecommunication Company (SWIFT) established in 1973 is still the most widely used method to send cross-border payment using the transmission of financial messages via the international SWIFTNet network.

However, the SWIFT financial messages do not hold accounts for its members nor make any form of clearing or settlement. It essentially only sends payment orders which need to be settled by the correspondent account that the institution has with each other. For this reason, each financial institution needs to have a banking relationship to exchange banking transactions.

This is why it requires 6 players linked up – payer, payer’s bank, payer’s bank’s correspondent, beneficiary bank’s correspondent, beneficiary bank, beneficiary to complete cross-border payments.

[1]

There are many obvious drawbacks of such system:

  • Cross-border payments can be expensive and sometimes even charged a percentage fees
  • Extra fees such as “lifting fees” or correspondent banking fees by intermediary banks are common
  • Bank keep the money for extra time and delay the payout “float money theft”
  • Exchange rate can have big spread

The high processing costs, lengthy settlement times and a poor customer experience prevents many new usage scenarios such as on-demand, low-value cross-border payment or mobile wallets. It is estimated that $1.6T per year for all parties in the ecosystem has spent yet unable to meet today’s cross-border payment need[2].

Ripple Labs (formerly OpenCoin) launched in 2012 with a mission to build a cross-border, interbank payment and settlement network using the concepts behind bitcoin. Ripple offers sub-second cross-border payments with automated best pricing from its network. As payments are nearly instant, it helps to remove the credit and liquidity risk from the process, lowering overall costs considerably.

 How is it done?

The core of its solution is RippleNet, a single, global network of banks that send and receive payments via Ripple’s distributed financial technology — providing real-time messaging, clearing and settlement of transactions.

RippleNet utilizes a subset of blockchain technology used in bitcoin. It uses the consensual validation of encrypted hashes to secure the messages across the Ripple network but does not hold the ledger, unlike bitcoin. Ripple names this open, neural protocol Interledger Protocol (ILP). ILP allows Ripple to connect existing bank ledgers, similarly to how banks connect their core system to the SWIFT network.

 

SWIFT GPI

From https://www.bellin.com/blog/swift-gpi-transparent-cross-border-payments/

Challenges in cross-border payments

Cross-border payments usually pass through several banks until the funds have been transferred from the payer to the account of the beneficiary. This is referred to as correspondent banking. This results in four obstacles that are virtually insurmountable for treasurers as things stand today:

1)   Time: Traditional cross-border payment orders can take several days from being released to being credited – way too long for efficient cash management.

2)   Transparency: Several correspondent banks can act as intermediaries between the bank initiating the payment and the beneficiary bank – an impenetrable banking jungle that causes treasurers sleepless nights for security and compliance reasons.

3)   Tracking: Today, treasurers neither know where a specific payment is located nor when it will be credited to the beneficiary – an incalculable business risk and a situation that often leads to time-consuming queries, trying to chase a payment.

4)   Remittance data: Remittance data is often altered somewhere along the line or information is lost. Sometimes the amount eventually credited to the account does not match the initial payment order because correspondent banks have deducted fees, resulting in a tedious reconciliation process once the money has arrived.

SWIFT global payments innovation – SWIFT gpi

In January 2017, SWIFT introduced the gpi Service that can be used to process global payments in a fast and traceable manner. The objective is for every one of the around 10,000 SWIFT Network banks to be able to offer money transfers within 24 hours with continuous end-to-end tracking and complete transparency along the entire payment chain by the end of 2020. This transparency and efficiency is made possible by using a specific gpi reference, the Unique End-to-End Transaction Reference UETR.

SWIFT GPI Instant Payment Cross Border

How the Unique End-to-End Transaction Reference (UETR) works 

You can compare the UETR to the tracking number of a parcel: The sender issues a unique, unalterable reference that shows you where the order is located at any one time. This reference ensures complete transparency as well as fully digitized and therefore speedy processing. In addition, the sender is automatically notified of any payment status changes. Conventional transfers often drop off the radar for quite some time, and you’re left wondering where your money has gone, not to mention the effort it will take you to retrace and reconcile afterwards.Conversely, gpi transfers generate an abundance of messages that keep you up to date on the status of your payment.

The same applies to the respective bank departments who can also trace corporate payments, enabling them to react to queries much faster. Some banks have integrated functionality in their online banking applications that enables corporate clients to track their gpi payments. Not a bad idea – the only downside is that most corporates use more than one bank for their international payments, which would mean checking several banking portals. This is why a bank-independent treasury management system such as tm5  is a much more elegant solution. All tracking and status information converges in one centralized hub, no matter how many banks are involved.

SWIFT gpi for Corporates (g4C) – new dynamic and transparency in treasury

In November 2018, SWIFT launched the SWIFT g4C project in order to enable corporates to directly benefit from the gpi technology. The objective was to offer corporates a solution for initiating gpi payment orders directly in their payments system. BELLIN was selected as one of the Early Adopters and was the first TMS provider with a client live on g4C. The pilot phase has been completed and the technology is fully integrated in the tm5 treasury management system and BELLIN’s SWIFT offering.

What does this mean for banks and companies?

The role of banks

Banks must be able to process certain information in order for it to be included in gpi payment orders. More than 280 financial institutions worldwide, including 49 of the TOP 50 banks, have agreed on a standardized SLA. With so many banks participating, communication is guaranteed. i.e. funds are transferred quickly from one bank to the next. By now, most banks have started processing cross-border payments as gpi payments.

The role of companies

The UETR is crucial for processing gpi payments. Companies that initiate their own payments, for example through a treasury management system integrated payment solution need to attach this reference to a payment order in line with SWIFT requirements or extend the format of a payment in the right place to include this information. The information transmitted by way of the UETR simplifies reconciliation and can be matched automatically, depending on the system.

BELLIN offers integrated SWIFT g4C technology

The BELLIN treasury management system, tm5, offers integrated SWIFT gpi technology. The system generates the unique and unalterable tracking reference UETR that is required for gpi payments. In addition, tm5 automatically processes incoming gpi status messages, enabling users to check the status of a payment at any time.

Corporates need a SWIFT BIC (Business Identifier Code) to make use of SWIFT g4C technology. They register their BIC for gpi for Corporates and connect financial institutions that offer g4C. All in all, SWIFT g4C unlocks completely new opportunities for automating treasury processes, in turn leading to efficiency gains and increased security.

How will gpi change treasury?

gpi is fast, creates transparency regarding fees and currencies and provides a wealth of information about the location of a payment and other aspects that simplify reconciliation. The SWIFT gpi initiative is clear evidence that corporate payments are moving towards real-time processing. In turn, this will change processes and the way treasurers work.

 

Retail Cross Border Payments Systems

 

Retail Payments/Transfers to India

{From ManiKarthik.com}

  • XOOM
  • Remitify
  • Remitly
  • Ria
  • Western Union
  • State Bank of India
  • Transfast
  • Transwise
  • ICICI Bank Money to India
  • WorldRemit
  • IndusInd Bank

 

Block Chain Based Cross Border Payment Systems

  • AIRFOX
  • CIRCLE PAY
  • ZCASH
  • RIPPLE
  • VEEM
  • IVY
  • GLUWA
  • STELLAR
  • ABRA

 

 

Top Cross Border Payment Companies

{https://www.ventureradar.com/keyword/Cross%20Border%20Payments}

  • Ripple
  • Seedrs
  • CurrencyFair
  • Transferwise
  • Payoneer
  • WorldRemit
  • Trustly Group
  • TransferGo
  • Raisin
  • Zooz
  • TransferMate Global Payments
  • Calastone
  • Airwallex
  • Hufsy
  • InstaReM
  • Caxton
  • Veem
  • nanoPay
  • Credorax
  • Transfast
  • wyre
  • Bitbound GmbH
  • Currency Transfer
  • Earthport PLC
  • Bitso
  • WB21
  • iSignthis
  • Currency Cloud
  • BitPay
  • MoneyTrans
  • Moni
  • Traxpay
  • Qwikwire
  • Streami Inc
  • PiP iT
  • Swych
  • HoneSend
  • Afrimarket
  • Fonmoney
  • Lala World
  • Flime
  • Smart Token Chain
  • TransferTo
  • EQ Global
  • Weeleo
  • SimbaPay
  • KUARIX
  • REMITWARE Payments
  • PingPong
  • Buckzy Payments

 

 

Please see my related posts:

Cross Border/Offshore Payment and Settlement Systems

Instant, Immediate, Real Time Retail Payment Systems (IIRT-RPS)

Evolving Networks of Regional RTGS Payment and Settlement Systems

Large Value (Wholesale) Payment and Settlement Systems around the Globe

Structure and Evolution of EFT Payment Networks in the USA, India, and China

Next Generation of B2C Retail Payment Systems

Understanding Global OTC Foreign Exchange (FX) Market

Sources of Research:

 

Ripple wants a piece of the global payment system

 

https://www.cnbc.com/2019/01/07/ripple-wants-a-piece-of-the-global-payment-system.html

How IBM Blockchain World Wire revolutionizes cross-border payments

IBM

https://www.ibm.com/downloads/cas/YW3W2JPZ

NAVIGATING A WORLD OF PAYMENT SOLUTIONS

WHAT YOU NEED TO KNOW FOR TODAY — AND TOMORROW

George H. Hoffman, CTP, CERTICM, Senior Vice President, Manager, International Advisory, PNC

Kacie V. Johnson, Assistant Vice President, International Advisor, PNC

 

Click to access navigating-payment-solutions.pdf

Siam Commercial Bank Of Thailand To Use Ripple For Cross-border Payments With Easy Pay App

Siam Commercial Bank Of Thailand To Use Ripple For Cross-border Payments With Easy Pay App

Ripple and Xendpay partner for cross-border payments

https://www.fxcompared.com/magazine/news/ripple-and-xendpay-partner-cross-border-payments

The Future Of Cross-Border Payments

FORBES

Click to access d173.pdf

 

A vision for the future of cross-border payments

McKinsey

 

https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/A%20vision%20for%20the%20future%20of%20cross%20border%20payments%20final/A-vision-for-the-future-of-cross-border-payments-web-final.ashx

FASTER, CHEAPER, SAFER: 9 COMPANIES USING BLOCKCHAIN PAYMENTS

https://builtin.com/blockchain/blockchain-payments

Global Payments 2020: Transformation and Convergence

BNY Mellon

Click to access global-payments-2020-transformation-and-convergence.pdf

 

Top 10 Trends in Payments 2018 : What You Need to Know

Cap Gemini 2018

Click to access payments-trends_2018.pdf

 

 

Strategies for Improving the U.S. Payment System

Federal Reserve Next Steps in the Payments Improvement Journey

Click to access other20170906a1.pdf

 

 

SWIFT gpi: A New Era in Treasury

Fast, transparent, traceable and system-integrated cross-border payments

https://www.bellin.com/blog/swift-gpi-transparent-cross-border-payments/

 

 

The Use of RMB in International Transactions:

-Background, Development and Prospect

Click to access pdf-rmb-JinZhongxia.pdf

 

 

 

The Cross-Border Payments Landscape

 

Click to access 9308A_1-2018-9-17.pdf

 

 

Swift to test real-time cross border payments in Europe

https://www.finextra.com/newsarticle/33852/swift-to-test-real-time-cross-border-payments-in-europe

 

 

Singtel’s cross-border payments system expands to Japan

The Via cross-border payments system has expanded into Japan thanks to a partnership with Netstars.

https://www.zdnet.com/article/singtels-cross-border-payments-system-expands-to-japan/

 

 

THE FUTURE OF CORRESPONDENT BANKINGCROSS BORDER PAYMENTS

RUTH WANDHÖFER

BARBARA CASU

PUBLICATION DATE: 10 OCTOBER 2018

 

Click to access SIWP-2017-001-The-Future-of-Correspondent-Banking_FINALv2.pdf

 

 

 

How are Asian FIs meeting the challenges and opportunities of cross-border payments?

A Survey on Trends in Cross-Border Payments in Asia Pacific

Click to access TAB_DEUTSCHE_BANK_WHITE_PAPER_-_FI_CROSS_BORDER_PAYMENT.pdf

 

 

 

The Inefficiencies of Cross-Border Payments: How Current Forces Are Shaping the Future

Written by Yoon S. Park, PHD & DBA, George Washington University

VISA

 

Click to access crossborder.pdf

 

 

 

CROSS-BORDER INTERBANK PAYMENT AND SETTLEMENTS

Emerging opportunities for digital transformation

 

Click to access Cross-Border-Interbank-Payments-and-Settlements.pdf

 

 

Global Payment Systems Survey (GPSS)

December 4, 2018
World Bank

https://www.worldbank.org/en/topic/financialinclusion/brief/gpss

 

 

 

Beijing creates its own global financial architecture as a tool for strategic rivalry

Govt of Canada

https://www.canada.ca/en/security-intelligence-service/corporate/publications/china-and-the-age-of-strategic-rivalry/beijing-creates-its-own-global-financial-architecture-as-a-tool-for-strategic-rivalry.html

 

 

 

SWIFT Vs. Ripple — The Importance of Speed in Cross-Border Payments

https://cointelegraph.com/news/swift-vs-ripple-the-importance-of-speed-in-cross-border-payments

 

 

Visa looks to speed up cross-border payments with new network launch

https://www.reuters.com/article/visa-payment/visa-looks-to-speed-up-cross-border-payments-with-new-network-launch-idUSL2N23H1NO

 

 

Cross-border Payment systems: SWIFT, RippleNet or BWW?

 

Cross-border Payment systems: SWIFT, RippleNet or BWW?

 

Rise of the yuan: China-based payment settlements jump 80%

Data shows Beijing attracting countries targeted by US sanctions

https://asia.nikkei.com/Business/Markets/Rise-of-the-yuan-China-based-payment-settlements-jump-80

 

 

 

http://www.cips.com.cn/cipsen/7052/7057/index.html

https://www.treasury-management.com/article/1/355/2929/cips-chinas-hybrid-net-settlement-clearing-system.html

 

 

SWIFT’s Battle For International Payments

Forbes

https://www.forbes.com/sites/francescoppola/2019/07/16/swifts-battle-for-international-payments/#64699a4e758e

 

 

EU Cross Border Payments: An evolving concept

 

Click to access lu-eu-cross-border-payments.pdf

 

 

 

INTERNATIONAL PAYMENTS IN A DIGITAL WORLD

YET ANOTHER BANKING BUSINESS THREATENED BY DIGITALIZATION

Click to access accenture-international-payments-digital-world-international-payments-digital-world.pdf

 

 

 

SWIFT gpi Time for action

Deutche Bank

 

Click to access Deutsche_Bank_SWIFT_gpi_White_Paper_December2017.pdf

 

 

 

B2B Payments and Fintech Guide 2019

Innovations in the Way Businesses Transact

 

Click to access B2B%20Payments%20and%20Fintech%20Guide%202019%20-%20Innovations%20in%20the%20Way%20Businesses%20Transact.pdf

 

 

Paying across borders – Can distributed ledgers bring us closer together?

  • RODRIGO MEJIA-RICART
  • CAMILO TELLEZ
  • MARCO NICOLI

MARCH 26, 2019

https://blogs.worldbank.org/psd/paying-across-borders-can-distributed-ledgers-bring-us-closer-together

 

 

Reinventing Payments

In An Era of Modernization

 

Click to access reinventing-payments-in-an-era-of-modernization.pdf

 

 

 

WORLD PAYMENTSREPORT

2018

 

Click to access World-Payments-Report-2018.pdf

 

 

 

Fundamentals of Global Payment Systems and Practices

Click to access Fundamentals_of_Payment_Systems.pdf

 

 

 

Global Payments 2018

REIMAGINING THE CUSTOMER EXPERIENCE

 

BCG

Click to access BCG-Global-Payments-2018-Oct-2018_tcm9-205095.pdf

 

 

 

Cross-Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies

CEPR

 

Click to access GenevaP223.pdf

 

 

 

Cross-Border Settlement Systems: Blockchain Models Involving Central Bank Money

Xiaohang Zhao, Haici Zhang, Kevin Rutter, Clark Thompson, Clemens Wan

Click to access CrossBorder_Settlement_Central_Bank_Money_R3-1.pdf

 

Steps to an Ecology of Mind: Recursive Vision of Gregory Bateson

Steps to an Ecology of Mind: Recursive Vision of Gregory Bateson

Gregory Bateson.  One of the most brilliant man I have read.  Please check out his books and books about him.  He was married to Margaret Mead, a famous Anthropologist.  His daughters Mary Catherine Bateson and Nora Bateson have also published books and documentaries about him.

  • Steps to an Ecology of Mind: Collected Essays in Anthropology, Psychiatry, Evolution, and Epistemology.
  • Mind and Nature: A Necessary Unity (Advances in Systems Theory, Complexity, and the Human Sciences).
  • A Sacred Unity: Further Steps to an Ecology of Mind
  • Angels Fear: Towards an Epistemology of the Sacred.
  • Communication: The Social Matrix of Psychiatry

 

GB used concepts of Cybernetics and Systems Theory to seek integration among:

  • Aesthetics
  • Consciousness
  • Sacred
  • Ecology

I have found book A Recursive Vision to be most helpful in understanding GB.

 

 

Please see my related posts.

Reflexivity, Recursion, and Self Reference

Systems View of Life: A Synthesis by Fritjof Capra

Meta Integral Theories: Integral Theory, Critical Realism, and Complex Thought

Truth, Beauty, and Goodness: Integral Theory of Ken Wilber

Cyber-Semiotics: Why Information is not enough

Levels of Human Psychological Development in Integral Spiral Dynamics

 

 

 

Key Sources of Research

 

GREGORY BATESON (1904-1980)

http://www.interculturalstudies.org/Bateson/

 

 

MEAD/BATESON RESOURCES

http://www.interculturalstudies.org/resources.html

 

Gregory Bateson and the Promise of Transdisciplinarity

December 2005

Alfonso Montuori

 

https://www.researchgate.net/publication/228380041_Gregory_Bateson_and_the_Promise_of_Transdisciplinarity

The Cybernetics Society

UK

http://www.cybsoc.org

Undersstanding Gregory Bateson

Suny Press

https://www.sunypress.edu/p-4615-understanding-gregory-bateson.aspx

 

 

Book “A Recursive Vision: Ecological Understanding and Gregory Bateson”

by Peter Harries-Jones

 

 

Gregory Bateson

WIKIPEDIA

https://en.wikipedia.org/wiki/Gregory_Bateson

 

 

Bateson Archive

Cambridge University

https://cudl.lib.cam.ac.uk/collections/batesonarchive/1

 

 

Bateson Archives

California

https://oac.cdlib.org/findaid/ark:/13030/kt029029gz/

AUM Conference 1973

https://www.kurtvonmeier.com/aum-conference-introduction

American Society for Cybernetics

USA

http://www.asc-cybernetics.org/foundations/history/MacySummary.htm

GREGORY BATESON, CYBERNETICS, AND THE SOCIAL/BEHAVIORAL SCIENCES

 

Click to access gbcatsbs.pdf

Interconnected Pythagorean Triples using Central Squares Theory

Interconnected Pythagorean Triples using Central Squares Theory

 

 

Triples are connected through Squares.

 

 

Key Terms

  • Pythagorean Theorem
  • Pythagorean Triples
  • Pythagorean Family of Triples
  • Plato family of Triples
  • 3D Pythagorean Theorem
  • Octahedron in 3D
  • Square in 2D
  • Square and Triangles
  • Pythagorean Tree
  • Geometrical Gear
  • 3D Geometrical Gear
  • Interconnected Triples
  • Tripartite Universe
  • Tri-loka
  • Great Pyramids
  • Set, Osiris, Isis
  • IS RA EL
  • Herma-polis and Helio-polis
  • Set/Thoth and RA/Atum
  • Shadows and Pillers
  • Saturn and Jupiter
  • Moon and Sun
  • Silver and Gold
  • Tamas and Rajas
  • Serpent and Eagle
  • Set and Horus
  • Fourth and Fifth
  • Descent and Ascent
  • Ganesh and Hanuman
  • Mars Planet
  • Sun, Earth, Moon
  • Three Parts of the Soul
  • Fundamental Triplicity
  • Inverted Pipal Tree in Hindu Cosmology
  • Vastu Purush Mandala
  • Brahma in Vedic Physics
  • Brahma, Vishnu, Mahesh/Shiv
  • Ram, Lakshman, Sita
  • Krishna, Baldev/Balram, Subhadra
  • Surya Vanshi  and Chandra Vanshi – Solar and Lunar Dynasties
  • Tripitaka in Buddhism
  • Eightfold path in Buddhism
  • Lotus and Diamond Sutra in Buddhism
  • Vajra and Lotus
  • Indra, Brahma, Buddha
  • Three Gunas – Satva, Rajas, Tamas
  • Three Sheaths – Gross, Subtle, Causal
  • Three Nadis: Pingala(Sun), Ida(Moon), Sushumna(Fire)
  • Three Doshas: Vata, Kapha, Pitta
  • Three Gods: Brahma, Rudra, Vishnu
  • Path: Ascending, Descending, Bidirectional
  • Three inner layers of Sushumna Nadi: Chitrini, Vajra, Brahma
  • Plimpton 322

 

Pythagorean Family of Triples

  • 3 4 5
  • 5 12 13
  • 7 24 25
  • 9 40 41

 

Plato Family of Triples

  • 3 4 5
  • 8 15 17
  • 12 35 37
  • 16 63 65

 

Pythagoras triples explained via central squares

Screen Shot 2019-09-28 at 2.11.35 PMScreen Shot 2019-09-28 at 2.03.32 PMScreen Shot 2019-09-28 at 2.06.47 PM

Anatomy of the Pythagoras’ tree

Screen Shot 2019-09-28 at 5.41.36 PM

 

Key sources of Research

Pythagoras triples explained via central squares

Luis Teia Gomes

 

Click to access EJ1093370.pdf

 

 

Anatomy of the Pythagoras’ tree

Luis Teia

The University of Lund, Sweden

luistheya@gmail.com

 

Click to access EJ1121416.pdf

Click to access Anatomy-of-the-Pythagoras-Tree.pdf

 

 

 

Fermat’s Theorem – a Geometrical View

 

Article · March 2017

 

Click to access Fermats-Theorem-a-Geometrical-View.pdf

 

The Pythagorean geometric gear

 

Luis Teia

University of Lund, Sweden

luistheya@gmail.com

 

Click to access The-Pythagorean-Geometric-Gear.pdf

 

 

Geometry of the 3 D Pythagoras ’ Theorem

  • Luis Teia
  • Published 2016

https://www.semanticscholar.org/paper/Geometry-of-the-3-D-Pythagoras-’-Theorem-Teia/87f4e288ef79ed7df384956ab5b6238d99301865

http://www.ccsenet.org/journal/index.php/jmr/article/download/64646/34833

 

 

 

Special Case of the Three-Dimensional Pythagorean Gear

(Australian Senior Mathematics Journal)

Article in Journal of the Australian Mathematical Society ·

December 2018

 

Click to access Special-Case-of-the-Three-Dimensional-Pythagorean-Gear-Australian-Senior-Mathematics-Journal.pdf

 

Geometry of 3D Pythagorean Theorem

 

 

 

 

 

The Pythagorean Tree: A New Species

H. Lee Price

September, 2008

 

Click to access 0809.4324.pdf

 

 

 

Pythagoras’ garden, revisited

  • Frank R. Bernhart, H. Lee Price
  • Published 2012

https://www.semanticscholar.org/paper/Pythagoras%27-garden%2C-revisited-Bernhart-Price/96e1d0c6c41d17dc103d1eea7a078c8e640cb903

 

Neuro-Accounting: Accounting, Brain, and Evolution

Neuro-Accounting:  Accounting, Brain, and Evolution

 

 

Key Terms

  • Neuro Accounting
  • Neuro Economics
  • Sudipta Basu
  • John Dickhaut
  • Kevin McCabe
  • Michael Hudson
  • Brain
  • Evolution
  • Culturally evolved Accounting
  • Biologically evolved Brain

 

 

From Neuroaccounting: Consilience between the Biologically Evolved Brain and Culturally Evolved Accounting Principles

We develop the hypothesis that culturally evolved accounting principles will be ultimately explained by their consilience with how the human brain has evolved biologically to evaluate social and economic exchange. We provide background on the structure and evolution of the brain, the measurement of brain behavior during economic decision making, and the brain’s central role in building economic institutions. We describe the emergence of modern accounting principles and argue that the primary function of accounting in evaluating exchange is to provide quantified information on the net benefits of past exchanges. We review evidence documented by neuroscientists that is consistent with the hypothesis that longstanding accounting principles 􏰁e.g., Revenue Realization and Conservatism􏰀 have distinct parallels in brain behaviors. Our analysis of Neuroaccounting extends Basu and Waymire 􏰁2006􏰀 to provide a new way to scientifically view accounting, which has implications for how we think about the origins and persistence of longstanding accounting principles.

 

 

 

Key Sources of Research:

 

Neuroaccounting: Consilience between the Biologically Evolved Brain and Culturally Evolved Accounting Principles

John Dickhaut, Sudipta Basu, Kevin McCabe, and Greg Waymire

Click to access 0c960538572c84f0dc000000.pdf

 

 

 

 

Recordkeeping and Human Evolution

Sudipta Basu and Gregory B. Waymire

2005

Click to access 00b49521c9d8edb99c000000.pdf

 

 

 

NeuroAccounting, Part I

The Primate Brain and Reciprocal Exchange

by

John Dickhaut Sudipta Basu Kevin McCabe Gregory Waymire

 

Click to access 0fcfd50577041d8f23000000.pdf

 

 

 

NeuroAccounting, Part II

Consilience Between Accounting Principles and the Primate Brain

by

John Dickhaut Sudipta Basu Kevin McCabe Gregory Waymire

Click to access 0fcfd5057704201078000000.pdf

 

 

 

 

Memory, transaction records, and The Wealth of Nations

Sudipta Basu , Marcus Kirk , Greg Waymire

 

Click to access BasuKirkWaymireAOS05Memory.pdf

 

 

 

 

Recordkeeping alters economic history by promoting reciprocity

Sudipta Basua, John Dickhautb, Gary Hechtc, Kristy Towryc, and Gregory Waymirec,1

Click to access 1009.full.pdf

 

 

 

 

The Role of Accounting in Civilization’s Economic Takeoff

Michael Hudson

 

Click to access hudson.pdf

What is Code Biology?

What is Code Biology?

 

 

 

Key Terms

  • Code Biology
  • Biosemiotics
  • Charles Sanders Peirce
  • Genetic Code
  • Musical Harmony
  • Symmetry
  • Jay Kappraff
  • Gary Adamson
  • Pythagorean Triples
  • Harmonic Laws
  • Numbers
  • Geometry
  • Matrices
  • Self, Culture, Nature
  • I, We, It, Its
  • Sergey V. Petoukhov
  • Codes
  • Meaning
  • Value
  • Marcello Barbieri
  • RNA, DNA, Proteins, Cells
  • Code Semiotics
  • Ferdinand D Saussure

 

What is Code Biology?

Codes and conventions are the basis of our social life and from time immemorial have divided the world of culture from the world of nature. The rules of grammar, the laws of government, the precepts of religion, the value of money, the rules of chess etc., are all human conventions that are profoundly different from the laws of physics and chemistry, and this has led to the conclusion that there is an unbridgeable gap between nature and culture. Nature is governed by objective immutable laws, whereas culture is produced by the mutable conventions of the human mind.

In this millennia-old framework, the discovery of the genetic code, in the early 1960s, came as a bolt from the blue, but strangely enough it did not bring down the barrier between nature and culture. On the contrary, a protective belt was quickly built around the old divide with an argument that effectively emptied the discovery of all its revolutionary potential. The argument that the genetic code is not a real code because its rules are the result of chemical affinities between codons and amino acids and are therefore determined by chemistry. This is the ‘Stereochemical theory’, an idea first proposed by George Gamow in 1954, and re-proposed ever since in many different forms (Pelc and Welton 1966; Dunnil 1966; Melcher 1974; Shimizu 1982; Yarus 1988, 1998; Yarus, Caporaso and Knight 2005). More than fifty years of research have not produced any evidence in favour of this theory and yet the idea is still circulating, apparently because of the possibility that stereochemical interactions might have been important at some early stages of evolution (Koonin and Novozhilov 2009). The deep reason is probably the persistent belief that the genetic code must have been a product of chemistry and cannot possibly be a real code. But what is a real code?

The starting point is the idea that a code is a set of rules that establish a correspondence, or a mapping, between the objects of two independent worlds (Barbieri 2003). The Morse code, for example, is a mapping between the letters of the alphabet and groups of dots and dashes. The highway code is a correspondence between street signals and driving behaviours (a red light means ‘stop’, a green light means ‘go’, and so on).

What is essential in all codes is that the coding rules, although completely compatible with the laws of physics and chemistry, are not dictated by these laws. In this sense they are arbitrary, and the number of arbitrary relationships between two independent worlds is potentially unlimited. In the Morse code, for example, any letter of the alphabet could be associated with countless combinations of dots and dashes, which means that a specific link between them can be realized only by selecting a small number of rules. And this is precisely what a code is: a small set of arbitrary rules selected from a potentially unlimited number in order to ensure a specific correspondence between two independent worlds.

This definition allows us to make experimental tests because organic codes are relationships between two worlds of organic molecules and are necessarily implemented by a third type of molecules, called adaptors, that build a bridge between them. The adaptors are required because there is no necessary link between the two worlds, and a fixed set of adaptors is required in order to guarantee the specificity of the correspondence. The adaptors, in short, are the molecular fingerprints of the codes, and their presence in a biological process is a sure sign that that process is based on a code.

This gives us an objective criterion for discovering organic codes and their existence is no longer a matter of speculation. It is, first and foremost, an experimental problem. More precisely, we can prove that an organic code exists, if we find three things: (1) two independents worlds of molecules, (2) a set of adaptors that create a mapping between them, and (3) the demonstration that the mapping is arbitrary because its rules can be changed, at least in principle, in countless different ways.

 

Two outstanding examples

The genetic code

In protein synthesis, a sequence of nucleotides is translated into a sequence of amino acids, and the bridge between them is realized by a third type of molecules, called transfer-RNAs, that act as adaptors and perform two distinct operations: at one site they recognize groups of three nucleotides, called codons, and at another site they receive amino acids from enzymes called aminoacyl-tRNA-synthetases. The key point is that there is no deterministic link between codons and amino acids since it has been shown that any codon can be associated with any amino acid (Schimmel 1987; Schimmel et al. 1993). Hou and Schimmel (1988), for example, introduced two extra nucleotides in a tRNA and found that that the resulting tRNA was carrying a different amino acid. This proved that the number of possible connections between codons and amino acids is potentially unlimited, and only the selection of a small set of adaptors can ensure a specific mapping. This is the genetic code: a fixed set of rules between nucleic acids and amino acids that are implemented by adaptors. In protein synthesis, in conclusion, we find all the three essential components of a code: (1) two independents worlds of molecules (nucleotides and amino acids), (2) a set of adaptors that create a mapping between them, and (3) the proof that the mapping is arbitrary because its rules can be changed.

 

The signal transduction codes

Signal transduction is the process by which cells transform the signals from the environment, called first messengers, into internal signals, called second messengers. First and second messengers belong to two independent worlds because there are literally hundreds of first messengers (hormones, growth factors, neurotransmitters, etc.) but only four great families of second messengers (cyclic AMP, calcium ions, diacylglycerol and inositol trisphosphate) (Alberts et al. 2007). The crucial point is that the molecules that perform signal transduction are true adaptors. They consists of three subunits: a receptor for the first messengers, an amplifier for the second messengers, and a mediator in between (Berridge 1985). This allows the transduction complex to perform two independent recognition processes, one for the first messenger and the other for the second messenger. Laboratory experiments have proved that any first messenger can be associated with any second messenger, which means that there is a potentially unlimited number of arbitrary connections between them. In signal transduction, in short, we find all the three essential components of a code: (1) two independents worlds of molecules (first messengers and second messengers), (2) a set of adaptors that create a mapping between them, and (3) the proof that the mapping is arbitrary because its rules can be changed (Barbieri 2003).

 

A world of organic codes

In addition to the genetic code and the signal transduction codes, a wide variety of new organic codes have come to light in recent years. Among them: the sequence codes (Trifonov 1987, 1989, 1999), the Hox code (Paul Hunt et al. 1991; Kessel and Gruss 1991), the adhesive code (Redies and Takeichi 1996; Shapiro and Colman 1999), the splicing codes (Barbieri 2003; Fu 2004; Matlin et al. 2005; Pertea et al. 2007; Wang and Burge 2008; Barash et al. 2010; Dhir et al. 2010), the signal transduction codes (Barbieri 2003), the histone code (Strahl and Allis 2000; Jenuwein and Allis 2001; Turner 2000, 2002, 2007; Kühn and Hofmeyr 2014), the sugar code (Gabius 2000, 2009), the compartment codes (Barbieri 2003), the cytoskeleton codes (Barbieri 2003; Gimona 2008), the transcriptional code (Jessell 2000; Marquard and Pfaff 2001; Ruiz i Altaba et al. 2003; Flames et al. 2007), the neural code (Nicolelis and Ribeiro 2006; Nicolelis 2011), a neural code for taste (Di Lorenzo 2000; Hallock and Di Lorenzo 2006), an odorant receptor code(Dudai 1999; Ray et al. 2006), a space code in the hippocampus (O’Keefe and Burgess 1996, 2005; Hafting et al. 2005; Brandon and Hasselmo 2009; Papoutsi et al. 2009), the apoptosis code (Basañez and Hardwick 2008; Füllgrabe et al. 2010), the tubulin code (Verhey and Gaertig 2007), the nuclear signalling code (Maraldi 2008), the injective organic codes (De Beule et al. 2011), the molecular codes (Görlich et al. 2011; Görlich and Dittrich 2013), the ubiquitin code (Komander and Rape 2012), the bioelectric code (Tseng and Levin 2013; Levin 2014), the acoustic codes (Farina and Pieretti 2014), the glycomic code (Buckeridge and De Souza 2014; Tavares and Buckeridge 2015) and the Redox code (Jones and Sies 2015).

The living world, in short, is literally teeming with organic codes, and yet so far their discoveries have only circulated in small circles and have not attracted the attention of the scientific community at large.

 

Code Biology

Code Biology is the study of all codes of life with the standard methods of science. The genetic code and the codes of culture have been known for a long time and represent the historical foundation of Code Biology. What is really new in this field is the study of all codes that came after the genetic code and before the codes of culture. The existence of these codes is an experimental fact – let us never forget this – but also more than that. It is one of those facts that have extraordinary theoretical implications.

The first is the role that the organic codes had in the history of life. The genetic code was a precondition for the origin of the first cells, the signal transduction codes divided the descendants of the common ancestor into the primary kingdoms of Archaea, Bacteria and Eukarya, the splicing codes were instrumental to the origin of the nucleus, the histone code provided the rules of chromatin, and the cytoskeleton codes allowed the Eukarya to perform internal movements, including those of mitosis and meiosis (Barbieri 2003, 2015). The greatest events of macroevolution, in other words, were associated with the appearance of new organic codes, and this gives us a completely new understanding of the history of life.

The second great implication is the fact that the organic codes have been highly conserved in evolution, which means that they are the great invariants of life, the sole entities that have been perpetuated while everything else has been changed. Code Biology, in short, is uncovering a new history of life and bringing to light new fundamental concepts. It truly is a new science, the exploration of a vast and still largely unexplored dimension of the living world, the real new frontier of biology.

 

References

Alberts B, Johnson A, Lewis J, Raff M, Roberts K, Walter P (2007) Molecular Biology of the Cell. 5th Ed. Garland, New York.

Barash Y, Calarco JA, Gao W, Pan Q, Wang X, Shai O, Blencow BJ and Frey BJ (2010). Deciphering the splicing code. Nature, Vol 465, 53-59.

Barbieri M (2003) The Organic Codes. An Introduction to Semantic Biology. Cambridge University Press, Cambridge, UK.

Barbieri M (2015) Code Biology. A New Science of Life. Springer, Dordrecht.

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CODE BIOLOGY, PEIRCEAN BIOSEMIOTICS, AND ROSEN’S RELATIONAL BIOLOGY

The classical theories of the genetic code claimed that its coding rules were determined by chemistry—either by stereochemical affinities or by metabolic reactions—but the experimental evidence has revealed a totally different reality: it has shown that any codon can be associated with any amino acid, thus proving that there is no necessary link between them. The rules of the genetic code, in other words, obey the laws of physics and chemistry but are not determined by them. They are arbitrary, or conventional, rules. The result is that the genetic code is not a metaphorical entity, as implied by the classical theories, but a real code, because it is precisely the presence of arbitrary rules that divides a code from all other natural processes. In the past 20 years, furthermore, various independent discoveries have shown that many other organic codes exist in living systems, which means that the genetic code has not been an isolated case in the history of life. These experimental facts have one outstanding theoretical implication: they imply that in addition to the concept of information we must introduce in biology the concept of meaning, because we cannot have codes without meaning or meaning without codes. The problem is that at present we have two different theoretical frameworks for that purpose: one is Code Biology, where meaning is the result of coding, and the other is Peircean biosemiotics, where meaning is the result of interpretation. Recently, however, a third party has entered the scene, and it has been proposed that Robert Rosen’s relational biology can provide a bridge between Code Biology and Peircean biosemiotics.

 

 

Please see my related posts

Semiotics, Bio-Semiotics and Cyber Semiotics

Autocatalysis, Autopoiesis and Relational Biology

Geometry of Consciousness

Mind, Consciousness and Quantum Entanglement

 

 

Key Sources of Research:

 

Code Biology

http://www.codebiology.org

 

What is Code Biology?

Marcello Barbieri

https://www.researchgate.net/publication/320332986_What_is_Code_Biology

Code Biology, Peircean Biosemiotics, and Rosen’s Relational Biology

Marcello Barbieri

 

 

 

Why Biosemiotics? An Introduction to Our View on the Biology of Life Itself

Kalevi Kull, Claus Emmeche and Jesper Hoffmeyer

 

 

 

BIOSEMIOTICS AND SELF-REFERENCE FROM PEIRCE TO ROSEN

Eliseo Fernández

Click to access PRfinal.pdf

 

 

 

What Does it Take to Produce Interpretation? Informational, Peircean and Code-Semiotic Views on Biosemiotics

Søren Brier & Cliff Joslyn

https://www.researchgate.net/publication/255813854_What_Does_It_Take_to_Produce_Interpretation_Informational_Peircean_and_Code-Semiotic_Views_on_Biosemiotics

Naturalizing semiotics: The triadic sign of Charles Sanders Peirce as a systems property

https://www.ncbi.nlm.nih.gov/pubmed/26276466

 

 

 

BIOSEMIOSIS AND CAUSATION: DEFENDING BIOSEMIOTICS THROUGH ROSEN’S THEORETICAL BIOLOGY OR INTEGRATING BIOSEMIOTICS AND ANTICIPATORY SYSTEMS THEORY1

Arran Gare

http://cosmosandhistory.org/index.php/journal/article/viewFile/806/1396

 

 

 

GENERALIZED GENOMIC MATRICES, SILVER MEANS, AND PYTHAGOREAN TRIPLES

Jay Kappraff

Gary W. Adamson

 

Click to access report0809-12.pdf

https://pdfs.semanticscholar.org/f641/6a1d093e77df80173ed76add159b452924b1.pdf?_ga=2.121727499.1841123216.1571671914-1769689123.1571671914

 

 

The genetic code, 8-dimensional hypercomplex numbers and dyadic shifts

 

Sergey V. Petoukhov

 

Click to access 1102.3596.pdf

 

 

 

A Fresh Look at Number

Jay Kappraff

Gary Adomson

Click to access bridges2000-255.pdf

 

 

 

SYMMETRIES IN MOLECULAR-GENETIC SYSTEMS AND MUSICAL HARMONY

G. Darvas, A.A. Koblyakov, S.V.Petoukhov, I.V.Stepanian

 

Click to access GENETIC_CODE_AND_MUSICAL_HARMONY_2012_PETOUKHOV.pdf

 

 

 

On the Semio-Mathematical Nature of Codes

Yair Neuman & Ophir Nave

Click to access On-the-Semio-Mathematical-Nature-of-Codes.pdf

 

 

GENETIC CODE AS A HARMONIC SYSTEM

Miloje M. Rakočević

 

Click to access 0610044.pdf

 

 

 

Genetic Code Table: A note on the three splittings into amino acid classes

Miloje M. Rakočević

 

Click to access 0903.4110.pdf

 

 

 

GENETIC CODE AS A HARMONIC SYSTEM: THREE SUPPLEMENTS

Miloje M. Rakočević

 

Click to access 0703011.pdf

 

 

THE GENETIC CODE INVARIANCE: WHEN EULER AND FIBONACCI MEET

Tidjani Négadi

 

Click to access 1305.5103.pdf

 

 

 

Genetic Code as a Coherent System

Miloje Rakočević

 

Click to access Genetic-Code-as-a-Coherent-System.pdf

 

 

 

A NEW GENETIC CODE TABLE

Miloje M. Rakočević

 

Click to access A-New-Genetic-Code-Table.pdf

 

 

 

Harmonically Guided Evolution

Richard Merrick

 

Click to access a084ad5ca081cf5ac00c82c77d5857795745.pdf

 

 

 

Golden and Harmonic Mean in the Genetic Code

Miloje M. Rakočević

Click to access 35c07d4f0e09a12acc2d6822a16407a14ccd.pdf

 

Rituals | Recursion | Mantras | Meaning : Language and Recursion

Rituals | Recursion | Mantras | Meaning : Language and Recursion

 

Key Terms

  • Rituals
  • Recursion
  • Mantras
  • Japa
  • Puja
  • Prayer
  • Psychological Development
  • Meaning
  • Meditation
  • Yoga
  • Vedas
  • Tantra
  • Hindu Vedic Rituals
  • Hindu Tantric Rituals
  • Language and Recursion
  • Speech
  • Communication
  • Organizing principle
  • Cognitive science
  • Linguistics
  • Panini
  • Pingala
  • Sanskrit
  • Act of walking and Talking
  • Take a walk
  • Vedic Meters
  • Gayatri Mantra
  • Grammer
  • Panini’s Asthadhyayi
  • Univarsal Grammer
  • Noam Chomsky
  • Frits Staal
  • Subhash Kak
  • Word and World
  • Structure of a Mantra
  • Structure of a Ritual
  • Prose and Poetry
  • Gadya and Padya
  • Fractals
  • Holarchy
  • Holons

Why Language and Thought Resemble Russian Dolls

Michael Corballis is a professor emeritus at the University of Auckland, who has written extensively on the evolution of language and the origins of thought.

 

Michael Corballis is a professor emeritus at the University of Auckland, who has written extensively on the evolution of language and the origins of thought. In his 2011 book The Recursive Mind, he wrote about how the structure of human language allows for recursion—in which ideas are nested within each other: “He thinks that I think that he thinks.” Recursion allows the construction of sentences of of theoretically unlimited complexity

The main argument of The Recursive Mind is that recursion applies to thought processes and actions that are not limited to language itself, but characterize other aspects of human thought, such as our ability to imagine ourselves in the past or future. I queried Corballis on some of these ideas. An edited transcript follows:

You wrote a book in the last few years called The Recursive Mind. What is recursion and why is it important?

Recursion can refer to a procedure that references itself or similar procedures, or to a structure that contains an embedded structure of the same type. It is important because it allows one to build entities of theoretically unlimited complexity by progressively embedding structures within structures.

Some scholars think that language may be built on the use of recursive building blocks. Isn’t that a fundamental tenet of the modern linguistics pioneered by Noam Chomsky.

Yes, Chomsky’s view of language is that it is recursive, and this gives language its potential for infinite complexity—or what he has also called “discrete infinity.” In recent formulations, this is achieved through an “unbounded Merge,” in which elements are merged, and the merged elements can then themselves be merged—a process that can be repeated without bounds. To Chomsky, though, language is essentially internal thought, a mental monologue, known as I-language, and not a means of communication. The structure of language is therefore a by-product of internal thought. This implies a common structure, called “universal grammar,” that underlies all languages. But there is growing doubt as to whether such a structure exists.

Wasn’t one of the flaws of Chomsky’s work that he thought that the recursion as found in internal self-talk was not linked in any way to natural selection and evolution

Yes, I think so. In Chomsky‘s view, the recursive principle emerged in a single step—a “great leap forward”—at some particular point in human evolution, probably within the time span of our own species. This is contrary to Darwinian evolution, which postulates that change occurs in small, incremental steps, implying that something as complex as language could not have occurred in a single step. Chomsky also argues that language could not have evolved through natural selection because the elements of language are fundamentally symbolic, with no direct reference to the external world, and could not have been “selected” by natural events.

I think these are flawed arguments. The idea of a single step is based in part on evidence of a sudden appearance of symbolic thought in the archeological record, but one can just as easily make a case for a gradual rise. Apes and dogs can fairly easily learn to respond meaningfully to spoken words, suggesting that they, like humans, have innate, mental concepts, to which words are easily attached. Even in humans, the apparently abstract nature of language might well have arisen from more iconic or even pantomimimed representations used as forms of communication that have become “conventionalized” through the generations, sustained through culture rather than biological endowment

I would argue instead that recursive thought may have origins in our ape-like forebears over 6 million years ago, but gained increasing complexity during the Pleistocene, dating from over 2 million years ago, largely as an adaptation toward increasing social complexity. Language depended on this broader recursive capacity, but also owed its earlier origins to manual gesture, perhaps developing a more complex structure through pantomime, with the iconic structure eventually replaced by vocal gestures (speech) or the more arbitrary signs of signed languages.

Hasn’t more recent work extended the idea of recursion? Isn’t it thought that recursive behaviors may actually precede language—and may have led to the emergence of language?

To some extent Chomsky’s view can be seen as consistent with this, since recursion applies to what he calls I-language, which is the language of thought rather than of communication. Communicative language can then regarded as a means of externalizing thought so that we can share our thoughts with others. It may have emerged after the “great leap forward” that gave us I-language, although Chomsky does not, as far as I know, suggest that thought and communicative language arose in sequence.

My own view is that recursive thoughts preceded language in broader ways. So-called theory of mind (“I know what you’re thinking”) or mental time travel (mentally reliving what I did yesterday, or foreseeing what I will do tomorrow) involve the embedding of thoughts within thoughts, and otherwise seem quite independent of what we understand as language. Navigation may be another example, as we embed maps within maps (my office in my house in my city in my country in the world). As I understand it, I-language is based on the structuring of internal symbols, whereas the extended examples I have given are more spatial or iconic than abstract, and therefore have a more direct relation with the external world. It is entirely plausible that they could have emerged through natural selection, which rescues language evolution from the “miracle” of a sudden great leap forward.

Since writing the book, I have moved further from the Chomskyan notion that language is uniquely human to finding the basis of mental time travel even in the ability of rats to “replay” and perhaps “preplay” trajectories in spatial environments. The aim of researchers should be to develop an account of the evolution of thought and language through natural selection, and not through some miraculous event within the past 100,000 years. .

Why are the origins of human language, considered to be one of the hardest problems in science?

The reason is that grammatical language, with its recursive structure, is considered unlike any other form of animal communication, and is restricted to our own species. Part of the difficulty is that we have no historical evidence to go on, since we are the only remaining species among the 20 or so hominins that split from the line leading to the great apes, and even the great apes closest to us do not appear to have grammatical language.

My sense is that we now have enough information from fossil evidence, primate communication, ancient DNA, and the structure of human cognition to begin to construct plausible Darwinian scenarios of how language might have evolved over the past 6 million or so years, and perhaps even earlier, without having to postulate a one-off miracle within the past 100,000.

From Art and Cosmology in India

 

General equivalences

The view that the arts belong to the domain of the sacred and that there is a connection between them is given most clearly in a famous passage in the Vishnudharmottara Purana in which the sage Markandeya instructs the king Vajra in the art of sculpture, teaching that to learn it one must first learn painting, dance, and music:

Vajra: How should I make the forms of gods so that the image may always manifest the deity?

Markandeya: He who does not know the canon of painting (citrasutram) can never know the canon of image-making (pratima lakshanam).

Vajra: Explain to me the canon of painting as one who knows the canon of painting knows the canon of image-making.

Markandeya: It is very difficult to know the canon of painting without the canon of dance (nritta shastra), for in both the world is to be represented.

Vajra: Explain to me the canon of dance and then you will speak about the canon of painting, for one who knows the practice of the canon of dance knows painting.

Markandeya: Dance is difficult to understand by one who is not acquainted with instrumental music (atodya).

Vajra: Speak about instrumental music and then you will speak about the canon of dance, because when the instrumental music is properly understood, one understands dance.

Markandeya: Without vocal music (gita) it is not possible to know instrumental music.

Vajra: Explain to me the canon of vocal music, because he, who knows the canon of vocal music, is the best of men who knows everything.

Markandeya: Vocal music is to be understood as subject to recitation that may be done in two ways, prose (gadya) and verse (padya). Verse is in many meters.

Please see my related posts

Sounds True: Speech, Language, and Communication

Reflexivity, Recursion, and Self Reference

Society as Communication: Social Systems Theory of Niklas Luhmann

Consciousness of Cosmos: A Fractal, Recursive, Holographic Universe

On Holons and Holarchy

Indra’s Net: On Interconnectedness

The Great Chain of Being

 

Key Sources of Research

God in the Fractals: Recursiveness as a Key to Religious Behavior

in Method & Theory in the Study of Religion

 

https://www.researchgate.net/publication/266226046_God_in_the_Fractals_Recursiveness_as_a_Key_to_Religious_Behavior

Eternal Recursion, the Emergence of Metaconsciousness, and the Imperative for Closure

Narrative Psychology: Language, Meaning, and Self

Narrative Psychology: Language, Meaning, and Self

 

Key Terms

  • Connections
  • Relationships
  • Meaning
  • Language
  • Social Psychology
  • Social Constructivism
  • Ethnomethodology
  • Phenomenology
  • Postmodernism
  • Post Postmodernism
  • Humanistic Psychology
  • Self as Interactional Process
  • Hermenutics
  • Self and Social Structures
  • I and We
  • AQAL model of Ken Wilber
  • Integral Theory
  • Meta Integral Theories
  • Cyber Semiotics

 

 

Introducing Narrative Psychology

MICHELE L. CROSSLEY

Narrative Psychology and the Study of Self/Identity

Much of what is said in this article derives from my recent book, Introducing Narrative Psychology: Self, Trauma and the Construction of Meaning (Crossley, 2000a). In that book, I began with the age-old, perennial question. What is a self? Who am I? C.S. Lewis once commented: ‘There is one thing, and only one in the whole universe which we know more about than that we could learn from external observation. That one thing is ourselves. We have, so to speak, inside information, we are in the know’ (Lewis, 1952). But how true is this? Are we ‘in the know’ about ourselves?

It may seem obvious to turn towards psychology in order to throw light on these complex questions regarding self and identity. After all, most people are drawn towards the study of psychology because they are interested in the ‘human condition’, what makes us human, our loves, passions, hates and desires. But most of us find ourselves only a few months into a psychology degree when we realise that we are dealing with very little of this. Instead, you are enmeshed in statistics, principles of learning, cognition, abstract theories and theoretical models, all of which bear very little resemblance to anything you were originally interested in studying. Somewhat ironically, a great deal of contemporary psychology, supposedly an area devoted to the study of human beings, has become a totally ‘lifeless’ discipline. So where do we look, in the discipline of psychology, if we want to examine these questions of self and identity?

In Introducing Narrative Psychology, I suggested four main areas of psychology which address these issues. These included: i) experimentally based social psychology; ii)humanistic psychology; iii) psychoanalytic/ psychodynamic psychology; and iv) social constructivist approaches. Highlighting the limitations associated with each of these four areas, I opened the way for a new narrative psychology approach which, although influenced by these approaches (especially humanistic and social constructivist), had the potential to avoid the pitfalls endemic within them.

The Central Role of Language and Stories

Of particular importance to the formulation of a narrative psychology approach is recognition, derived from social constructivist approaches, of the central role played by language and stories in the process of self construction. As Crites (1986), wrote: ‘A self without a story contracts into the thinness of its personal pronoun.’ And Mair:

Stories are the womb of personhood. Stories make and break us. Stories sustain us in times of trouble and encourage us towards ends we would not otherwise envision. The more we shrink and harden our ways of telling, the more starved and constipated we become (Mair, 1989: 2)

‘Always in emergencies’, argued Broyard (1992: 21), ‘we invent narratives’:

We describe what is happening as if to confine the catastrophe. When people heard that I was ill, they inundated me with stories of their own illnesses, as well as the cases of friends. Storytelling seems to be a natural reaction to illness. People bleed stories and I’ve become a bloodbank of them (Broyard, 1992: 21)

Narrative as an ‘Organising Principle’ for Human Life

But it is not just the fact that people tell stories in making sense of themselves and others. A narrative psychological approach goes far deeper than that. For, central to this approach, is the development of a phenomenological understanding of the unique ‘order of meaning’ constitutive of human consciousness (see Crossley, 2000a; Polkinghorne, 1988). One of the main features of this ‘order of meaning’ is the experience of time and temporality. An understanding of temporality associated with the human realm of meaning is entirely different to that encountered in the natural sciences. This is because the human realm of meaning it is not related to a ‘thing’ or a ‘substance’ but to an ‘activity’ (Polkinghorne, 1988: 4). Everything experienced by human beings is made meaningful, understood and interpreted in relation to the primary dimension of ‘activity’ which incorporates both ‘time’ and ‘sequence’. In order to define and interpret ‘what’ exactly has happened on any particular occasion, the sequence of events is of extreme importance. Hence, a valid portrayal of the experience of selfhood necessitates an understanding of the inextricable connection between temporality and identity.

It is in accordance with these basic principles of temporality and connection that numerous authors such as MacIntyre (1981), Carr (1986) and Sarbin (1986) have put forward the idea that human psychology has an essentially narrative structure. Sarbin, for instance, proposes what he calls the ‘narratory principle’; this is the idea that human beings think, perceive, imagine, interact and make moral choices according to narrative structures. Sarbin uses the word narrative as coterminous with ‘story’:

A story is a symbolised account of actions of human beings that has a temporal dimension. The story has a beginning, middle, and an ending (or as Kermode (1967) suggests, the sense of an ending). The story is held together by recognisable patterns of events called plots. Central to the plot structure are human predicaments and attempted resolutions. (Sarbin, 1986: 3)

Sarbin treats narrative as the ‘organising principle for human action’. By this, he means that the concept of narrative can be used to help account for the observation that human beings always seek to impose structure on the flow of experience. Such a narrative principle invokes a humanisitic image of the self as a teller of stories, of heroes and villains, plots, and images of actors performing and engaging in dialogue with other actors.

Charles Taylor’s (1989) work is particularly important to the development of an understanding of self as intrinsically connected to temporality, interactions with others, and ultimately, morality. It is Taylor’s main contention that concepts of self and morality are inextricably intertwined – we are selves only in that certain issues matter for us. What I am as a self, my identity, is essentially defined by the way things have significance for me. To ask what I am in abstraction from self-interpretation makes no sense (Taylor, 1989: 34). Moreover, my self-interpretation can only be defined in relation to other people, an ‘interchange of speakers’. I cannot be a self on my own but only in relation to certain ‘interlocutors’ who are crucial to my language of self-understanding. In this sense, the self is constituted through ‘webs of interlocution’ in a ‘defining community’ (Taylor ibid, 39; see also Crossley, N., 1996). This connection between our sense of morality and sense of self, according to Taylor, means that one of our basic aspirations is the need to feel connected with what we see as ‘good’ or of crucial importance to us and our community. We have certain fundamental values which lead us to basic questions such as ‘what kind of life is worth living?’; ‘What constitutes a rich, meaningful life, as against an empty, meaningless one’? (Taylor ibid, 42).

A vision of ‘the good’ becomes available for people in any given culture by being given expression or articulation in some form or another. This articulation most often occurs through language and symbolic systems such as custom and ritual which reverberate with knowledge of connections and relationships across the generations. (Taylor ibid, 91). Such articulation brings us closer to the good as a moral source and gives it further power and potency. Stories have a tremendous force in this process insofar as they have the capacity to confer meaning and substance on peoples’ lives, to subtly influence their progression and orientation towards a particular ‘good’ (ibid, 97).

For example, cultures transmit to children knowledge of typical patterns of relationships, meanings and moralities in their myths, fairytales, histories and stories (see Bettelheim, 1976; Howard, 1991; Polkinghorne, 1988). And we are inculcated from a very early age to seeing connections between events, people and the world in a certain way through the stories and narratives told within our families (Langellier and Peterson, 1993; McAdams, 1993). Moreover, this process does not stop during childhood. As adolescents and adults we are exposed on a daily basis to TV dramas, soap operas, movie blockbusters and talk-shows, all of which play out, in the same way as the fairytale does for the child, eternal moral conflicts (see McLeod, 1997; Priest, 1996).

 

One of the central premises of a narrative psychological approach then, is of the essential and fundamental link between experiences of self, temporality, relationships with others and morality. We have a sense of who we are through a sense of where we stand in relation to ‘the good’. Hence, connections between notions of ‘the good’, understandings of the self, the kinds of stories and narratives through which we make sense of our lives, and conceptions of society, evolve together in ‘loose packages’ (Taylor ibid, 105).

Human Experience and Narrative Structure

Carr (1986) argues that the reality of human experience can be characterised as one which has a narrative or story-telling character (ibid, p.18). What would it be, he asks, to experience life as a ‘mere’ or ‘pure’ sequence of isolated events, one thing after another? In order to illustrate his thesis Carr draws upon phenomenological approaches such as Husserl’s theory of time consciousness which depicts the way in which humans ordinarily experience time. He basically makes a distinction between three levels of human experience: passive experience, active experience and experience of self/life. At each of these levels, human experience can be characterised by a complex temporal structure akin to the configuration of the storied form (see also Bruner, 1990; 1991). In the following exploration of human time consciousness, we will look at each of these experiential levels in turn.

According to Husserl, even as we encounter events at the most passive level (that is, when we are not consciously aware that we are encountering them), they are charged with the significance they derive from our anticipation of the future (‘protention’) and our memory of things past (‘retention’). His point is not that we have the capacity to project and remember but that we cannot even experience anything as happening, as present, except against the background of what it succeeds and what we anticipate will succeed it. Hence, when we experience time, we have no option but to experience it as an interrelated ‘configuration’ of past-present-future. Our experience automatically assumes temporally extended forms in which future, present and past mutually determine one another as parts of a whole. Husserl gives the example of a note in a melody. When we are listening to a melody we do not encounter notes in that melody as isolated elements or components. Rather, the note is encountered and ‘understood’ as part of a sequence as a whole. It only takes on ‘meaning’ in relation to the note that has preceded it and in anticipation of that which will succeed it. Hence the ‘presence’ of the note can only be encountered in relation to a mutually determined retentional- protentional structure. This kind of temporal experience is analogous to the Gestalt phenomena often discussed in relation to spatial perception.

 

Carr proceeds to argue that if this ‘configurational’ dimension is true of our most passive experiences, it is even more so true of our active lives in which we ‘explicitly consult past experience, envisage the future and view the present as a passage between the two’. Carr argues that the ‘means-end’ structure of action that we experience in everyday life is akin to the beginning-middle-end plot structure of narrative and thus, ‘the structure of action … is common to art and life’. This idea is also central to literary theorist Paul Ricouer’s notion that ‘time becomes human to the extent that it is articulated through a narrative mode’ (Ricoeur, 1984: 85). According to Ricoeur there are two sorts of time in every story told: on the one hand a discrete succession that is open and theoretically indefinite, for example, a series of incidents for which we can always pose the question, ‘and then? and then?’, much like a chronicle of events. The other sort of time is characterised by integration, culmination and closure owing to which the story receives a particular configuration. In this sense, composing a story involves drawing together a series of events in order that they make sense in relation to one another (Ricoeur, 1991: 121). We tend to experience activities, both short and long term, in relation to this latter mode, sometimes referred to by Ricoeur as the process of emplotment. The point is, our present activity only makes sense, and is framed in terms of, a vast array of interrelated memories from times past and anticipations of and for the future. Hence, the temporal configuration characteristic of narrative structure is akin not only to passive but also to active human experience.

If we can talk of narrative structure in connection with individual passive and active experiences, then the notion of a ‘life-story’ requires yet a further, more comprehensive grasp which brings separate ‘stories’ together, takes them all as ‘mine’ and establishes connections among them (Carr, 1986: 75). Although we have argued that there is a past-present-future temporal configuration (a narrative structure) at the level of passive and active experience, it is not difficult too see that at this more complex level (life as a whole), something special is required in the way of a reflexive (looking back) temporal grasp, to hold together the phases of these longer-term phenomena and preserve their coherence. This, of course, is the classic process of autobiography in which there is an attempt to envisage the coherence of a life through selection, organisation and presentation of its component parts. Some authors such as Kierkegaard (1987) have argued that it is through this process of autobiographical selection that we become ethical beings; in the telling of our life stories, we become responsible for our lives. Literary theorist Paul Ricoeur makes such responsibility central to his concept of ‘narrative identity’, arguing that the self only comes into being in the process of telling a life story (Ricoeur, 1986: 132).

 

It is important to point out here that we may be in danger of suggesting that in order to help us understand ourselves and our lives we actually need literary creations such as works of fiction, biography and autobiography. Indeed, Ricoeur, has been accused of placing too much emphasis on the role of ‘story’ as the instance where meaning is created, at the expense of ‘human life’ (Widdershoven, 1993). However, if we bring forth the conception of the narrative structure of human experience and action developed by Carr, we can see that the meaning created in the autobiographical act of reflection and that found within everyday experience and action, actually exist on a continuum rather than being radically discontinuous. In Carr’s terms ‘lives are told in being lived and lived in being told’ (ibid, p.61). The actions and sufferings of life can be viewed as a process of telling ourselves stories, listening to those stories and acting them out or living through them. Hence:

It is not the case that we first live and act and then afterward, seated around the fire as it were, tell about what we have done … The retrospective view of the narrator, with its capacity for seeing the whole in all its irony, is not an irreconcilable opposition to the agent’s view but is an extension and refinement of a viewpoint inherent in action itself … narration, intertwined as it is with action, (creates meaning) in the course of life itself, not merely after the fact, at the hands of authors, in the pages of books. (ibid, p.61)

When Carr refers to narration here, he is not just referring to the fact that a great deal of our everyday conversations are devoted to telling stories (although this is true). His point about narrative is more to do with its role in constituting the sense of the actions we engage in and the events we live through, its role in organising temporally and giving shape and coherence to the sequence of experiences we have as we are in the process of having them (ibid, p.62). Hence, the notion of narrative structure or the act of narrative structuring does not necessarily take on the form of explicit verbalisation. It refers more to the fact that, as the agent or subject of experience, I am constantly attempting to:

surmount time in exactly the way the storyteller does’. I constantly ‘attempt to dominate the flow of events by gathering them together in the forward-backward grasp of the narrative act … (ibid, p.62)

Carr further argues that our constant attempt to achieve a sense of structure and order in the course of our everyday activities and lives is firmly based on our practical orientation within the world. In order to get on in everyday life we need things to hang together, to make sense, to have some sense of connection. If, for instance, I found myself writing this paper and it bore very little resemblance to anything I had ever done before, I would have great difficulty pursuing it because I would be unable to see the point – why am I doing this? Where will it take me? Where do I go from here? And for the most part it is ‘normal’ for us to experience such narrative coherence in the sense that for most of us, for most of the time ‘things do, after all, make sense, hang together’ (ibid, p.90).

 

It is in this sense that Carr insists that everyday reality is permeated with narrative and that the human experience of time is one of configured time. ‘The narrative grasp of the story-teller’, he claims, ‘is not a leap beyond time but a way of being in time. It is no more alien to time than the curving banks are alien to the river or the potter’s hands to the clay’ (ibid, p.89). According to this perspective, literary stories such as fiction and autobiography do not in any sense ‘impose’ a structure and order on human action and life. Instead, they tend to reinforce and make more explicit the symbolisation that is already at work within a culture at the level of practical human action. The function of narratives such as autobiographies then, is simply to reveal structures or meanings that previously remained implicit or unrecognised, and thus to transform life and elevate it to another level.

But is Human Life Narratively Configured?

In characterising psychological life through the concept of narrative, however, are we not overplaying the significance played by the storied form in human experience? At the level of ‘personal’ experience, some researchers have argued that although human experience may bear some resemblance to the story, the idea that it takes on a narrative structure is mistaken. The core of this argument is that the coherent temporal unity lying at the heart of stories (the connection between beginning, middle and end) is something that is not at all intrinsic to real human events, real selves and real life. As literary theorist Frank Kermode argues, such ‘narrative properties cannot be ascribed to the real’ (cited in Wood, 1991: 160). The historian Louis Mink argues a similar point: ‘Stories are not lived but told … Life has no beginnings, middles and ends…Narrative qualities are transferred from art to life’ (cited in Wood, 1991: 161).

A related point is made by literary theorist Roland Barthes with regard to the selective capacity of the author of the story and his/her ability to create and determine coherence and order within the text. The literary text has a sense of structure and order because the elements and events making up the story have been ‘put there’ by the author. Disruptive elements have been ‘eliminated’. Life, in contrast to the careful manipulation of the story, cannot possibly have such a structure. Thus, it has been argued, whereas the story has an ‘implicit contract’ towards order, life has no such contract. (Bell, 1990: 174). In this sense, it is claimed, the story differs radically from ‘life’ insofar as in the latter, everything is ‘scrambled messages’, ‘chaos rather than order’ (see Carr cited in Wood, 1991: 161).

 

There is some truth to this argument. However, is it the case that life admits of no selection, that everything is ‘left in’, a vast array of ‘scrambled messages’? For example, Carr argues that our most basic capacity for attention and following through various activities or projects is premised on our capacity for selection. Hence, just like the author of the literary text, we partially determine the course of our own lives by selecting and omitting certain elements and events. As Carr argues:

Extraneous details are not left out but they are pushed into the background, saved for later, ranked in importance. And whose narrative voice is accomplishing all this? None but our own, of course. In planning our days and our lives we are composing the stories or the dramas we will act out and which will determine the focus of our attention and our endeavours, which will provide the principles for distinguishing foreground from background. (Carr cited in Wood, 1991: 165)

This may be story planning or plotting, but is it story-telling? ‘Most assuredly it is, quite literally, since we are constantly explaining ourselves to others. And finally each of us must count himself among his own audience since in explaining ourselves to others we are often trying to convince ourselves as well’ (Carr cited in Wood, 1991: 165). Hence, through the interrelated processes of story-plotting and story-telling we partially determine the stories of our lives.

The word ‘partial’ is important here, however, because we should not take this point – the self as a teller of her own story – too far. The critical arguments of theorists who dispute the analogy between ‘life’ and ‘narrative’ are important insofar as they emphasise the fact that, unlike the author of fiction, we do not totally create the materials we are to form. To a certain degree, we are stuck with what we have in the way of characters, capacities and circumstances. For instance, if a woman is married to a man who batters her every night when he comes in drunk from the pub, the fact that she secretly harbours fantasies of a white knight in shining armour coming to rescue her one day and that everything will turn out OK in the end, will have very little influence on her real life which is likely to be characterised by repeated abuse, dependency and further victimisation.

Likewise, just as we are unable to control the beginnings of our stories, so too are we unable, unlike the fictional author, to describe our already completed lives. Instead, we are in the middle of our lives and we cannot be sure how they will end. Hence, although I may have a plan to write my next book, I do not have any idea what may await me around the corner. As the old proverb goes, ‘There’s many a slip ‘twixt the cup and the lip’ (Crites, 1986: 166). All manner of things could happen to forestall my plan and render it irrelevant. For example, I may be made redundant, in which case I would probably feel there is little point in continuing to write a book. I may fall seriously ill and be rendered incapable of completing the project; or even if I remained capable, my goals and values may change in the face of confrontation with the possibility of death. I may have to rethink my aims and projects, change direction, and start a new story. Hence, the fact that we cannot wholly determine either the beginning or the end of our lives, suggests that our activities and projects do lack the formal order and coherence of literary stories. Life, unlike the story, does not have an ‘implicit contract’ towards order.

 

However, one of the main aims of a narrative psychological approach is to provide an alternative to certain social constructionist and postmodernist approaches which have considerably overplayed the disorderly, chaotic and variable nature of contemporary human experience (Crossley, 2000c). On a routine, daily basis, there is more order and coherence than such accounts suggest. This is nowhere more apparent than when we examine traumatising experiences, which have the capacity to painfully highlight the ‘normal’ state of narrative coherence which is routinely taken-for-granted and thus remains ‘unseen’ within the active experiencing of everyday existence.

Narrative Incoherence and the Breach of Trauma

One good example of disruptive traumatising experiences is that of chronic or serious illness. In recent years numerous studies of chronic illness have illustrated the potentially devastating impact they can have on a person’s life. This has been characterised as an ‘ontological assault’ in which some of the most basic, underlying existential assumptions that people hold about themselves and the world are thrown into disarray (Crossley, 2000b; Janoff Bulman, 1992; Kleinman, 1988; Taylor, S., 1989).

One of the most fundamental building blocks of the perceived world to be destroyed in the experience of chronic illness, is one’s basic sense of time. Many phenomenologically and existentially oriented writers have highlighted that time is basic and fundamental to an understanding of contemporary human existence insofar as our normal, routine temporal orientation is one of projecting into the future. It is important to make clear, however, that we are not necessarily consciously aware of the fact that we project into the future in this way. Our taken-for-granted assumptions about and towards time, are only made visible when a ‘shock’ or a ‘disruption’ occurs, throwing them into sharp relief (see Schutz, 1962; Garfinkel, 1984). The experience of chronic illness constitutes such a disruption. When a person receives a serious illness diagnosis, they are immediately shocked out of the complacency of the assumed futurity of their existence and their whole conception of themselves, their life and their world is likely to undergo radical changes. Frank (1995) uses the metaphor of ‘narrative wreckage’ to characterise such experiences.

 

In previous research, I have shown how much of the traumatic emotional and psychological impact of living with a HIV positive diagnosis can be traced back to the disturbance and disruption of this fundamentally experienced sense of ‘lived time’ (Davies, 1997). The threat of chaos, of meaninglessness, is evident in the following quote from Paula, a HIV positive woman I interviewed, whose husband, a haemophiliac had recently died from HIV infection. When I asked her about her plans for the future she said:

I don’t think of the future as in what is going to happen in a year’s time or whatever. My future seems to have stopped when Mark (her husband) died because I am on my own and I just live from day to day … I am only 28 and I feel as if I have been put in a shop and left there … It is as if I am stuck in a sort of bubble and nothing seems to, I can’t get out of it … it’s frightening to think that I am going to be like that until I die … It’s terrible when you have got no-one to talk to … that’s a large part of it now for me, it is the loneliness, especially of a night-time when the kids are in bed … I often keep the baby up just to keep me company, it is horrible, I shouldn’t because he needs his rest … but … if I do send him to bed, it is so silent, it is just me. Often I go to bed early because I can’t stand being on my own …

Paula’s comments make abundantly clear the ‘unmaking’ of her world, and highlight her previous taken-for-granted sense of identity and projection into the future.

Adapting to Trauma: Stories and Narrative Coherence

Research into the experience of chronic and serious illness illustrates the way in which our routine, ‘lived’ sense of time and identity is one of implicit connection and coherence. This sense is severely disrupted in the face of trauma and it is in such contexts that stories become important as a way of re- building a sense of connection and coherence. As the recent proliferation of autobiographies (especially in relation to diseases such as cancer and HIV/AIDS) and self-help groups suggests, for people suffering the trauma of illness, storytelling takes on a ‘renewed urgency’ (Mathieson and Stam, 1995: 284). Of course, such a narrative understanding bears a strong affinity with Freud’s work, which equated mental ill health with an ‘incoherent story’ and narrative breakdown. From this perspective, psychotherapy constituted an exercise in ‘story repair’ and, as Spence (1982) argued:

 

Freud made us aware of the persuasive power of a coherent narrative – in particular of the ways in which an aptly chosen reconstruction can fill the gap between two apparently unrelated events, and in the process, make sense out of nonsense. There seems no doubt but that a well constructed story possesses a kind of narrative truth that is real and immediate and carries an important significance for the process of therapeutic change.

Conclusion

This paper has aimed to introduce some of the main themes underpinning a narrative approach towards psychology. Drawing on some of dominant theories in this area, it has argued that human life carries within it a narrative structure to the extent that the the individual, at the level of tacit, phenomenological experience, is constantly projecting backwards and forwards in a manner that maintains a sense of coherence, unity, meaningfulness and identity. From this perspective, the characterisation of human experience as one of constant flux, variability and incoherence, as manifest in many discursive and postmodern approaches, fails to take sufficient account of the essential unity and integrity of everyday lived experience. In accordance with this theoretical perspective, it has been argued that the experience of traumatic events such as serious illness are instrumental in facilitating an appreciation of the way in which human life is routinely narratively configured. This is because the experience of traumatisation often serves to fundamentally disrupt the routine and orderly sense of existence, throwing into radical doubt our taken-for-granted assumptions about time, identity, meaning, and life itself. When this happens, it is possible to examine the way in which narratives become important in another sense. This is in terms of the way in which they are used to restore a sense of order and connection, and thus to re-establish a semblance of meaning in the life of the individual. Accordingly, narratives of illness are useful because they help to reveal structures or meanings that typically remain implicit or unrecognised, thus potentiating a transformation of life and elevation to another level.

References

Bell, M. (1990) ‘How Primordial is Narrative?’, in (ed) Nash, C. Narrative in culture: The uses of storytelling in the sciences, philosophy and literature, Routledge, London.

Bettelheim, B. (1976). The uses of enchantment: The meaning and importance of fairy tales, Knopf, NY.

Broyard, A. (1992) Intoxicated by my illness, and other writings on life and death, Clarkson, Patter, New York.

 

Bruner, J. (1991) The narrative construction of reality. Critical Inquiry, 18: 1-21.

Bruner, J. (1990) Acts of meaning, Harvard University Press, Massachusetts. Carr, D. (1986). Time, narrative and history, Indiana University Press, Bloomington.

Crites, S. (1986) Storytime: recollecting the past and projecting the future, in (ed) Sarbin, T. Narrative psychology: The storied nature of human conduct, Praeger, New York.

Crossley, M.L. (2000a) Introducing narrative psychology: Self, trauma and the construction of meaning, Open University Press, Buckinghamshire.

Crossley, M. (2000b) Rethinking health psychology, Open University Press, Buckinghamshire.

Crossley, M. (2000c) Narrative psychology, trauma, and the study of self/ identity, Theory and Psychology, Vol.10, No.4: 527-46.

Crossley, N. (1996) Intersubjectivity: The fabric of social becoming, Sage, London.

Davies M.L. (1997) Shattered assumptions: Time and the experience of long- term HIV positivity, Social Science and Medicine, 44, 5: 561-571.

del Vecchio Good, M., Munakata, T., Kobayashi, Y., Mattingly, C., Good, B. (1994) Oncology and narrative time, Social Science and Medicine. 38: 855-62.

Frank, A. (1995) The wounded storyteller: Body, illness and ethics, University of Chicago Press, Chicago.

Garfinkel H. (1984) Studies in ethnomethodology, Polity, Cambridge. Heidegger, M. (1962) Being and time, Blackwell, Oxford.

Howard, G. (1991) Culture Tales: A Narrative Approach to Thinking, Cross- Cultural Psychology and Psychotherapy, American Psychologist, 46, 3: 187-197.

Janoff-Bulman R. (1992) Shattered assumptions: Towards a new psychology of trauma, Free Press, New York.

Kierkegaard, S. (1987) Either/or, part 2, Princeton University Press, Princeton.

Kleinman, A. (1988) The illness narratives: Suffering, healing and the human condition, Basic Books, New York.

Langellier, K. and Peterson, E. (1996) Family storytelling as a strategy of social control, in Mumby, D. (ed) Narrative and social control, Vol.21, Sage Annual Review of Communication Research, London.

Lewis, C.S. (1952) Mere Christianity, Macmillan, New York.

MacIntyre, A. (1981) After virtue, Notre Dame University Press, Notre Dame.

Mair, M. (1989) Between Psychology and Psychotherapy, Routledge, London.

Mathieson, C. and Stam, H. (1995) Renogotiating identity: cancer narratives, Sociology of Health and Illness, 17, 3: 283-306.

McAdams, D. (1993) The Stories We Live By: Personal Myths and the Making of the Self, Morrow, New York.

McLeod, J. (1997) Narrative and Psychotherapy, Sage, London.

Polkinghorne, D.P. (1988) Narrative knowing and the human sciences, SUNY Press, Albany.

Priest, P. (1996) ‘“Gilt By Association”: Talk Show Participants Televisually Enhanced Status And Self-Esteem’, in Grodin, D. and Lindlof, T. (eds) Constructing The Self In A Mediated World, Sage, London.

Ricoeur, P. (1991) Life in quest of narrative’, in (ed) Wood, D. Paul Ricoeur: narrative and interpretation (pp.20-33), Routledge, London.

Sarbin, T.R. (eds) (1986) Narrative psychology: The storied nature of human conduct, Praeger, New York.

Schutz, A. (1962) Collected papers, I. Martin Nijhoff, The Hague.

Taylor, C. (1989) Sources of the self: The making of modern identity, Cambridge University Press, Cambridge.

Taylor S. (1989) Positive illusions: Creative self deception and the healthy mind, Basic Books, New York.

Widdershoven, G. (1993) ‘The story of life: Hermeneutic perspective on the relationship between narrative and history’, in (eds) Josseleson, R. and Lieblich, A. The narrative study of lives, Vol.1, Sage, London.

 

Please see my related posts

Levels of Human Psychological Development in Integral Spiral Dynamics

Meta Integral Theories: Integral Theory, Critical Realism, and Complex Thought

Truth, Beauty, and Goodness: Integral Theory of Ken Wilber

Socio-Cybernetics and Constructivist Approaches

Sounds True: Speech, Language, and Communication

Cyber-Semiotics: Why Information is not enough

Society as Communication: Social Systems Theory of Niklas Luhmann

 

 

Key Sources of Research

Introduction to Narrative Psychology

Click to access Chapter_1_Michelle_Crossley.pdf

 

Narrative psychology and narrative analysis

https://www.researchgate.net/publication/274889276_Chapter_6_Narrative_psychology_and_narrative_analysis

Psychology of Happiness: Value of Storytelling and Narrative Plays

Psychology of Happiness: Value of Storytelling and Narrative Plays

 

Key terms

  • Katha
  • Kahani
  • Natak
  • Nautanki
  • Kathputli
  • Natya Shastra
  • Drama
  • Movies
  • Theater
  • Stories
  • Narratives
  • Literature
  • Arts
  • Upnishads
  • Puranas
  • Emotional Intelligence
  • Vulnerabilities
  • Neediness
  • Grief, Fear, and Insecurities
  • Inner World
  • Self Sufficiency
  • Inadequateness

Value of Stories and Narratives

 

Philosopher Martha Nussbaum on How to Live with Our Human Fragility

“To be a good human being is to have a kind of openness to the world, an ability to trust uncertain things beyond your own control.”

In 1988, Bill Moyers produced a series of intelligent, inspiring, provocative conversations with a diverse set of cultural icons, ranging from Isaac Asimov to Noam Chomsky to Chinua Achebe. It was unlike any public discourse to have ever graced the national television airwaves before. The following year, the interviews were transcribed and collected in the magnificent tome Bill Moyers: A World of Ideas (public library). But for all its evenness of brilliance, one conversation in the series stands out for its depth, dimension, intensity, and timelessness — that with philosopher Martha Nussbaum, one of the most remarkable and luminous minds of our time, who sat down to talk with Moyers shortly after the publication of her enormously stimulating book The Fragility of Goodness: Luck and Ethics in Greek Tragedy and Philosophy.

Martha Nussbaum

 

Moyers begins by framing Nussbaum’s singular approach to philosophy and, by extension, to the art of living:

MOYERS: The common perception of a philosopher is of a thinker of abstract thoughts. But stories and myths seem to be important to you as a philosopher.

NUSSBAUM: Very important, because I think that the language of philosophy has to come back from the abstract heights on which it so often lives to the richness of everyday discourse and humanity. It has to listen to the ways that people talk about themselves and what matters to them. One very good way to do this is to listen to stories.

Reflecting on the timeless wisdom of the Greek myths and tragedies, particularly Euripides’s Hecuba, Nussbaum considers the essence of good personhood, which necessitates accepting the basic insecurity of existenceand embracing uncertainty. She tells Moyers:

The condition of being good is that it should always be possible for you to be morally destroyed by something you couldn’t prevent. To be a good human being is to have a kind of openness to the world, an ability to trust uncertain things beyond your own control, that can lead you to be shattered in very extreme circumstances for which you were not to blame. That says something very important about the human condition of the ethical life: that it is based on a trust in the uncertain and on a willingness to be exposed; it’s based on being more like a plant than like a jewel, something rather fragile, but whose very particular beauty is inseparable from its fragility.

The paradox of the human condition, Nussbaum reminds us, is that while our capacity for vulnerability — and, by extension, our ability to trust others — may be what allows for tragedy to befall us, the greatest tragedy of all is the attempt to guard against hurt by petrifying that essential softness of the soul, for that denies our basic humanity:

Being a human means accepting promises from other people and trusting that other people will be good to you. When that is too much to bear, it is always possible to retreat into the thought, “I’ll live for my own comfort, for my own revenge, for my own anger, and I just won’t be a member of society anymore.” That really means, “I won’t be a human being anymore.”

You see people doing that today where they feel that society has let them down, and they can’t ask anything of it, and they can’t put their hopes on anything outside themselves. You see them actually retreating to a life in which they think only of their own satisfaction, and maybe the satisfaction of their revenge against society. But the life that no longer trusts another human being and no longer forms ties to the political community is not a human life any longer.

Illustration by Alice and Martin Provensen from ‘The Iliad and the Odyssey: A Giant Golden Book.’ 

 

Things get significantly more complicated, however, when we find ourselves in binds that seem to call for tragedy by asking us to make impossible choices between multiple things we hold dear. Nussbaum illustrates this by pointing to Aeschylus’s Agamemnon, in which the king-protagonist has to choose between saving his army and saving his daughter. The same tragedy plays out on a smaller scale in everyday dilemmas, such as juggling your career with being a good parent. Most of the time, as Nussbaum puts it, the two “enrich each other and make the life of each of them better.” But sometimes, practical circumstances pose such insurmountable challenges like an important meeting and your child’s school play happening at the same time — one of these two priorities inevitably suffers, not because you are a bad parent or a bad leader, but because life just happens that way. Therein lies the human predicament — the more we aspire to live well, according to our commitments and priorities, the more we welcome such tragic choices. And yet the solution isn’t not to aspire. Nussbaum tells Moyers:

Tragedy happens only when you are trying to live well, because for a heedless person who doesn’t have deep commitments to others, Agamemnon’s conflict isn’t a tragedy…

Now the lesson certainly is not to try to maximize conflict or to romanticize struggle and suffering, but it’s rather that you should care about things in a way that makes it a possibility that tragedy will happen to you. If you hold your commitments lightly, in such a way that you can always divest yourself from one or the other of them if they conflict, then it doesn’t hurt you when things go badly. But you want people to live their lives with a deep seriousness of commitment: not to adjust their desires to the way the world actually goes, but rather to try to wrest from the world the good life that they desire. And sometimes that does lead them into tragedy.

Perhaps Alan Watts was right when he advised not to fight the world’s contradictions but to conceive of the universe as “a harmonious system of contained conflicts.”

Bill Moyers: A World of Ideas is a treasure trove in its entirety, featuring many more conversations with luminaries spanning art, science, psychology, literature, the creative spirit, and just about every aspect of life. Complement this particular one with Nussbaum’s advice on living a full life.

 

Do Not Despise Your Inner World: Advice on a Full Life from Philosopher Martha Nussbaum

“Our emotional life maps our incompleteness: A creature without any needs would never have reasons for fear, or grief, or hope, or anger.”

When he was twenty-one, artist and writer James Harmon stumbled into a bookstore and found himself mesmerized by a copy of Rilke’s Letters to a Young Poet, the central concerns in which — love, fear, art, doubt, sex — resonated powerfully with his restless young mind and inspired him to envision what advice to young people might look like a century after Rilke. So he set out to create an antidote to the “toxic cloud of tepid-broth wisdom” found in books “with the shelf life of a banana” that the contemporary publishing world peddled and reached out to some of the most “outspoken provocateurs, funky philosophers, cunning cultural critics, social gadflies, cyberpunks, raconteurs, radical academics, literary outlaws, and obscure but wildly talented poets. The result, a decade in the making and the stubborn survivor of ample publishing pressure to grind it into precisely the kind of mush Harmon was determined to avoid, is Take My Advice: Letters to the Next Generation from People Who Know a Thing or Two (public library) — an anthology of thoughtful, honest, brave, unfluffed advice from 79 cultural icons, including Mark Helprin, Katharine Hepburn, Bette Davis, and William S. Burroughs.

One of the most poignant letters comes from philosopher Martha Nussbaum, who makes an eloquent case for the importance of cultivating a rich inner life by celebrating emotional excess as a generative force, embracing vulnerability, not fearing feelings, and harnessing the empathic power of storytelling.

Martha Nussbaum

 

Do not despise your inner world. That is the first and most general piece of advice I would offer… Our society is very outward-looking, very taken up with the latest new object, the latest piece of gossip, the latest opportunity for self-assertion and status. But we all begin our lives as helpless babies, dependent on others for comfort, food, and survival itself. And even though we develop a degree of mastery and independence, we always remain alarmingly weak and incomplete, dependent on others and on an uncertain world for whatever we are able to achieve. As we grow, we all develop a wide range of emotions responding to this predicament: fear that bad things will happen and that we will be powerless to ward them off; love for those who help and support us; grief when a loved one is lost; hope for good things in the future; anger when someone else damages something we care about. Our emotional life maps our incompleteness: A creature without any needs would never have reasons for fear, or grief, or hope, or anger. But for that very reason we are often ashamed of our emotions, and of the relations of need and dependency bound up with them. Perhaps males, in our society, are especially likely to be ashamed of being incomplete and dependent, because a dominant image of masculinity tells them that they should be self-sufficient and dominant. So people flee from their inner world of feeling, and from articulate mastery of their own emotional experiences. The current psychological literature on the life of boys in America indicates that a large proportion of boys are quite unable to talk about how they feel and how others feel — because they have learned to be ashamed of feelings and needs, and to push them underground. But that means that they don’t know how to deal with their own emotions, or to communicate them to others. When they are frightened, they don’t know how to say it, or even to become fully aware of it. Often they turn their own fear into aggression. Often, too, this lack of a rich inner life catapults them into depression in later life. We are all going to encounter illness, loss, and aging, and we’re not well prepared for these inevitable events by a culture that directs us to think of externals only, and to measure ourselves in terms of our possessions of externals.

What is the remedy of these ills? A kind of self-love that does not shrink from the needy and incomplete parts of the self, but accepts those with interest and curiosity, and tries to develop a language with which to talk about needs and feelings. Storytelling plays a big role in the process of development. As we tell stories about the lives of others, we learn how to imagine what another creature might feel in response to various events. At the same time, we identify with the other creature and learn something about ourselves. As we grow older, we encounter more and more complex stories — in literature, film, visual art, music — that give us a richer and more subtle grasp of human emotions and of our own inner world. So my second piece of advice, closely related to the first, is: Read a lot of stories, listen to a lot of music, and think about what the stories you encounter mean for your own life and lives of those you love. In that way, you will not be alone with an empty self; you will have a newly rich life with yourself, and enhanced possibilities of real communication with others.

Complement with some timeless meditations on the meaning of life from other cultural icons, then revisit Nussbaum on how to live with our human fragility and the intelligence of the emotions.

The Intelligence of Emotions: Philosopher Martha Nussbaum on How Storytelling Rewires Us and Why Befriending Our Neediness Is Essential for Happiness

“Emotions are not just the fuel that powers the psychological mechanism of a reasoning creature, they are parts, highly complex and messy parts, of this creature’s reasoning itself.”

The Intelligence of Emotions: Philosopher Martha Nussbaum on How Storytelling Rewires Us and Why Befriending Our Neediness Is Essential for Happiness

“The power of ‘the Eye of the Heart,’ which produces insight, is vastly superior to the power of thought, which produces opinions,” the great British economic theorist and philosopher E.F. Schumacher wrote in his 1973 meditation on how we know what we know. He was responding to the Persian poet and philosopher Rumi who, seven centuries earlier, extolled “the eye of the heart” as seventy-fold more seeing than the “sensible eyes” of the intellect. To the intellectually ambitious, this might sound like a squishy notion — or a line best left to The Little Prince. But as contemporary scientists continue to shed light on how our emotions affect our susceptibility to disease, it is becoming increasingly clear that our emotional lives are equipped with a special and non-negligible kind of bodily and cognitive intelligence.

The nature of that intelligence and how we can harness its power is what Martha Nussbaum, whom I continue to consider the most compelling and effective philosopher of our time, examines in her magnificent 2001 book Upheavals of Thought: The Intelligence of Emotions (public library). Titled after Proust’s conception of the emotions as “geologic upheavals of thought,” Nussbaum’s treatise offers a lucid counterpoint to the old idea that our emotions are merely animal energies or primal impulses wholly separate from our cognition. Instead, she argues that they are a centerpiece of moral philosophy and that any substantive theory of ethics necessitates a substantive understanding of the emotions.

Martha Nussbaum

Nussbaum writes:

A lot is at stake in the decision to view emotions in this way, as intelligent responses to the perception of value. If emotions are suffused with intelligence and discernment, and if they contain in themselves an awareness of value or importance, they cannot, for example, easily be sidelined in accounts of ethical judgment, as so often they have been in the history of philosophy. Instead of viewing morality as a system of principles to be grasped by the detached intellect, and emotions as motivations that either support or subvert our choice to act according to principle, we will have to consider emotions as part and parcel of the system of ethical reasoning. We cannot plausibly omit them, once we acknowledge that emotions include in their content judgments that can be true or false, and good or bad guides to ethical choice. We will have to grapple with the messy material of grief and love, anger and fear, and the role these tumultuous experiences play in thought about the good and the just.

[…]

Emotions are not just the fuel that powers the psychological mechanism of a reasoning creature, they are parts, highly complex and messy parts, of this creature’s reasoning itself.

One of Nussbaum’s central points is that the complex cognitive structure of the emotions has a narrative form — that is, the stories we tell ourselves about who we are and what we feel shape our emotional and ethical reality, which of course is the great psychological function of literature and the reason why art can function as a form of therapy. What emerges is an intelligent manifesto for including the storytelling arts in moral philosophy.

But this narrative aspect also means that our emotions have a temporal dimension stretching back to our formative experiences. Nussbaum writes:

We cannot understand [a person’s] love … without knowing a great deal about the history of patterns of attachment that extend back into [the person’s] childhood. Past loves shadow present attachments, and take up residence within them. This, in turn, suggests that in order to talk well about them we will need to turn to texts that contain a narrative dimension, thus deepening and refining our grasp of ourselves as beings with a complicated temporal history.

Illustration by Dasha Tolstikova from The Jacket by Kirsten Hall, a sweet illustrated story about how we fall in love with books

 

Nussbaum considers the essential features of the emotions as they relate to moral philosophy:

Insofar as they involve acknowledgment of neediness and lack of self-sufficiency, emotions reveal us as vulnerable to events that we do not control.

[…]

Emotions seem to be characterized by ambivalence toward their objects. In the very nature of our early object relations … there lurks a morally subversive combination of love and resentment, which springs directly from the thought that we need others to survive and flourish, but do not at all control their movements. If love is in this way always, or even commonly, mixed up with hatred, then, once again, this might offer us some reasons not to trust to the emotions at all in the moral life, but rather to the more impersonal guidance of rules of duty.

In a sentiment that psychoanalyst Adam Phillips would come to echo more than a decade later in examining the essential role of ambivalence in love, Nussbaum points to the particular case of romance as an acute manifestation of this latter aspect:

Personal love has typically been thought too wonderful to remove from human life; but it has also been seen (not only by philosophers) as a source of great moral danger because of its partiality and the extreme form of vulnerability it involves, which make a connection with jealousy and anger virtually inevitable.

She returns to the role of the emotions as acknowledgements, both necessary and disorienting, of our neediness and lack of self-sufficiency:

Emotions … involve judgments about important things, judgments in which, appraising an external object as salient for our own well-being, we acknowledge our own neediness and incompleteness before parts of the world that we do not fully control.

Illustration by Lisbeth Zwerger for a special edition of Alice in Wonderland

She revisits the rationale behind the book’s title:

Emotions should be understood as “geological upheavals of thought”: as judgments in which people acknowledge the great importance, for their own flourishing, of things that they do not fully control — and acknowledge thereby their neediness before the world and its events.

But this neediness — a notion invariably shrouded in negative judgment and shame, for it connotes an admission of our lack of command — is one of the essential features that make us human. Nussbaum writes:

Human beings appear to be the only mortal finite beings who wish to transcend their finitude. Thus they are the only emotional beings who wish not to be emotional, who wish to withhold these acknowledgments of neediness and to design for themselves a life in which these acknowledgments have no place. This means that they frequently learn to reject their own vulnerability and to suppress awareness of the attachments that entail it. We might also say … that they are the only animals for whom neediness is a source of shame, and who take pride in themselves to the extent to which they have allegedly gotten clear of vulnerability.

And yet neediness, Nussbaum argues, is central to our developmental process as human beings. Much like frustration is essential for satisfaction, neediness becomes essential for our sense of control:

The process of development entails many moments of discomfort and frustration. Indeed, some frustration of the infant’s wants by the caretaker’s separate comings and goings is essential to development — for if everything were always simply given in advance of discomfort, the child would never try out its own projects of control.

[…]

The child’s evolving recognition that the caretaker sometimes fails to bring it what it wants gives rise to an anger that is closely linked to its emerging love. Indeed, the very recognition that both good things and their absence have an external source guarantees the presence of both of these emotions — although the infant has not yet recognized that both take a single person as their object.

But while these formative experiences can nurture our emotional intelligence, they can also damage it with profound and lifelong consequences, as in the case of one patient Nussbaum cites — a man known as B, whose mother was so merciless in requiring perfection of herself that she construed her infant’s neediness as her own personal failing, resenting every sign of basic humanness and rejecting it as imperfection in both her child and herself. Nussbaum traces the developmental repercussions:

As B makes contact with these memories of a holding that was stifling, the patient gradually becomes aware of his own demand for perfection in everything – as the corollary of his inability to permit himself to be a needy child. Because his mother wanted perfection (which he felt as a demand for immobility and even death), he could not allow himself to be dependent on, or to trust, anyone.

Illustration by Sophie Blackall from her book The Baby Tree

Above all, emotionally skillful parenting — or “holding” — early in life awakens the child to a simultaneous sense of being omnipotent and being thoroughly dependent:

The parents’ (or other caregivers’) ability to meet the child’s omnipotence with suitably responsive and stable care creates a framework within which trust and interdependence may thus gradually grow: the child will gradually relax its omnipotence, its demand to be attended to constantly, once it understands that others can be relied on and it will not be left in a state of utter helplessness. This early framework of steadiness and continuity will provide a valuable resource in the later crisis of ambivalence. On the other hand, to the extent that a child does not receive sufficiently stable holding, or receives holding that is excessively controlling or intrusive, without space for it to relax into a relationship of trust, it will cling, in later life, to its own omnipotence, demanding perfection in the self and refusing to tolerate imperfection either in object relations or in the inner world.

The infant’s ambivalent relation to its own lack of omnipotence can be shaped for better or worse by interactions that either exacerbate primitive shame or reduce it. A primitive shame at one’s weakness and impotence is probably a basic and universal feature of the emotional life. But a parent who takes delight in having a child who is a child, and who reveals in interacting with the child that it is all right to be human, eases the ambivalence of later object relations

This quality of parental response to neediness in the first few months of life, Nussbaum argues, imprints us deeply and lastingly. It shapes how we relate to neediness in ourselves — we come to see it either as a shameful sign of helplessness, with absolute and therefore unattainable perfection as the only admissible state of which we continually fall short, or as a natural and wholly acceptable part of the human experience. (Lest we forget, the sixth of Neil Gaiman’s eight rules of writing applies not only to literature but to all of life: “Perfection is like chasing the horizon. Keep moving.” Pathological perfectionism, after all, is how we keep ourselves small.)

Nussbaum considers the complexities of shame, which becomes the dominant emotional response to our own neediness under the tyranny of perfectionism:

All infant omnipotence is coupled with helplessness. When an infant realizes that it is dependent on others, we can therefore expect a primitive and rudimentary emotion of shame to ensue. For shame involves the realization that one is weak and inadequate in some way in which one expects oneself to be adequate.58 Its reflex is to hide from the eyes of those who will see one’s deficiency, to cover it. If the infant expects to control the world, as to some extent all infants do, it will have shame, as well as anger, at its own inability to control.

Notice, then, that shame is far from requiring diminished self-regard. In a sense, it requires self-regard as its essential backdrop. It is only because one expects oneself to have worth or even perfection that one will shrink from or cover the evidence of one’s nonworth or imperfection. To the extent that all infants enjoy a sense of omnipotence, all infants experience shame at the recognition of their human imperfection: a universal experience underlying the biblical story of our shame at our nakedness. But a good development will allow the gradual relaxing of omnipotence in favor of trust, as the infant learns not to be ashamed of neediness and to take a positive delight in the playful and creative “subtle interplay” of two imperfect beings.

Illustration by Maurice Sendak for The Juniper Tree: And Other Tales from Grimm

 

This interplay of two imperfect beings is, as Joseph Campbell memorably observed, the essence of romantic love. An intolerance for imperfection and for the basic humanity of our own neediness, Nussbaum notes, can impede our very capacity for connection and make our emotions appear as blindsiding, incomprehensible events that befall us rather than a singular form of our natural intelligence:

The emotions of the adult life sometimes feel as if they flood up out of nowhere, in ways that don’t match our present view of our objects or their value. This will be especially true of the person who maintains some kind of false self-defense, and who is in consequence out of touch with the emotions of neediness and dependence, or of anger and aggression, that characterize the true self.

Nussbaum returns to the narrative structure of the emotions and how storytelling can help us rewire our relationship to neediness:

The understanding of any single emotion is incomplete unless its narrative history is grasped and studied for the light it sheds on the present response. This already suggests a central role for the arts in human self-understanding: for narrative artworks of various kinds (whether musical or visual or literary) give us information about these emotion-histories that we could not easily get otherwise. This is what Proust meant when he claimed that certain truths about the human emotions can be best conveyed, in verbal and textual form, only by a narrative work of art: only such a work will accurately and fully show the interrelated temporal structure of emotional “thoughts,” prominently including the heart’s intermittences between recognition and denial of neediness.

Narrative artworks are important for what they show the person who is eager to understand the emotions; they are also important because of what they do in the emotional life. They do not simply represent that history, they enter into it. Storytelling and narrative play are essential in cultivating the child’s sense of her own aloneness, her inner world. Her capacity to be alone is supported by the ability to imagine the good object’s presence when the object is not present, and to play at presence and absence using toys that serve the function of “transitional objects.” As time goes on, this play deepens the inner world; it becomes a place for individual creative effort and hence for trusting differentiation of self from world.

In the remainder of Upheavals of Thought, which remains a revelatory read in its hefty totality, Nussbaum goes on to explore how the narrative arts can reshape our psychoemotional constitution and how understanding the intelligence of the emotions can help us navigate the messiness of grief, love, anger, and fear.

Complement it with Nussbaum on how to live with our human fragility and her terrific letter of life-advice to the young, then revisit the social science writer John W. Gardner on what infants teach us about risk, failure, and personal growth.

 

Key Sources of Research

 

 

The Intelligence of Emotions: Philosopher Martha Nussbaum on How Storytelling Rewires Us and Why Befriending Our Neediness Is Essential for Happiness

 

 

Philosopher Martha Nussbaum on How to Live with Our Human Fragility

 

 

Do Not Despise Your Inner World: Advice on a Full Life from Philosopher Martha Nussbaum

 

Drama Theory: Choices, Conflicts and Dilemmas

Drama Theory: Choices, Conflicts and Dilemmas

 

Key Terms

  • Scenes
  • Scenario
  • Games
  • Conflicts
  • Cooperation
  • Agreements
  • Harmony
  • Dissonance
  • Dilemma
  • Drama Theory
  • Game Theory
  • Rationality
  • Irrationality
  • Choices
  • Interdependent Decisions
  • Operations Research
  • Chain of Events
  • Situations
  • Cascading effects
  • Situational Awareness
  • Paradoxes
  • Uncertainty
  • Complexity
  • Human Fragility
  • Human Fallibility
  • Outcomes / Results
  • Social Landscape
  • Natya Shastra
  • Social Simulation
  • Social Interaction
  • Social Psychology
  • Hermenutics
  • Inter-subjective Interpretation
  • Inter-objective Analysis
  • Art and Culture
  • Humanities Vs Science
  • Culture Vs Nature

 

I discuss below Pakistani TV Dramas as an example of drama theory.

 

Pakistani TV Drama Serials

Recently I was introduced to Pakistani TV Dramas.  They are in Urdu/Hindi language and available on Youtube for free.  I list selected ones below. The ones I have seen so far.

  • Baaghi
  • Sangat
  • Digest Writer
  • Mein Sitara

Pakistani actor Saba Qamar plays leading role in each of the dramas.  Her performance in each one is the finest and classiest I have seen in Cinema/TV Drama/Movies.  In each of these dramas, main character played by Saba Qamar is faced by choices, desires, ambitions, conflicts, and family responsibilities in a society where women abuse, corruption, self interest, deceit, cunning, manipulation, extortion, exploitation, poverty, rich-poor divide, rural-urban divide, men in power, english/urdu divide, and religious/cultural/social/family norms and traditions define her ecosystem and its limits and boundaries..

She is faced with issues of societal respect, approval, and morality in contemporary pakistani society.  What would people say? What would family say? Society matters.  Family matters.  Choices and dilemmas she faces and actions/decisions she takes define her life.  Outcomes of the dramas display human fragility, fallibility, and sometimes profile in courage.

Sequence of events is dependent on interdependent decisions and actions by the characters in the drama.

Path taken creates the path dependency.  There are no retreats.  Future is threatened. Only rise or fall ahead. Fame and fortune or shame and failure.

Lost in this ecosystem is love, innocence, and simplicity.

While navigating her life in harsh and cruel world, she preserves her innate goodness, and unfathomable grace.

As a responsible and loving mother. As a responsible daughter and sister.

As a human being.

Saba Qamar brings in unmatched depth and sensitivity to her performance in each of the drama I listed above. Ofcourse, all other characters create the situations and dilemmas for her.

What should she do?  Her choices and dilemmas

What does she do?  Her actions and decisions

What should she have done? Society/Viewers value systems / World views/Opinions

Are there alternative desired outcomes?  Reflection, Learning, Insights, Changes, and Modifications

 

 

Drama Theory From Wikipedia

Drama theory is one of the problem structuring methods in operations research. It is based on game theory and adapts the use of games to complex organisational situations, accounting for emotional responses that can provoke irrational reactions and lead the players to redefine the game. In a drama, emotions trigger rationalizations that create changes in the game, and so change follows change until either all conflicts are resolved or action becomes necessary. The game as redefined is then played.

Drama theory was devised by Professor Nigel Howard in the early 90s and, since then, has been turned to defense, political, health, industrial relations and commercial applications. Drama theory is an extension of Howard’s metagame analysis work developed at the University of Pennsylvania in the late 1960s, and presented formally in his book “Paradoxes of Rationality”, published by MIT Press. Metagame analysis was originally used to advise on the Strategic Arms Limitation Talks (SALT).

Basics of drama theory

A drama unfolds through episodes in which characters interact. The episode is a period of preplay communication between characters who, after communicating, act as players in a game that’s constructed through the dialogue between them. The action that follows the episode is the playing out of this game; it sets up the next episode. Most drama-theoretic terminology is derived from a theatrical model applied to real life interactions; thus, an episode goes through phases of scene-setting, build-up, climax and decision. This is followed by denouement, which is the action that sets up the next episode. The term ‘drama theory’ and the use of theatrical terminology is justified by the fact that the theory applies to stage plays and fictional plots as well as to politics, war, business, personal and community relations, psychology, history and other kinds of human interaction. It was applied to help with the structuring of Prisoner’s Dilemma, a West End play by David Edgar about the problems of peace-keeping.

In the build-up phase of an episode, the characters exchange ideas and opinions in some form or another and try to advocate their preferred position – the game outcome that they are hoping to see realised. The position each character takes may be influenced by others’ positions. Each character also presents a fallback or stated intention. This is the action (i.e., individual strategy) a character says it will implement if current positions and stated intentions do not change. Taken together, the stated intentions form what is called a threatened future if they contradict some character’s position; if they do not – i.e., if they implement every position – they form what is called an agreement.

When it is common knowledge among the characters that positions and stated intentions are seen by their presenters as ‘final’, the build-up ends and the parties reach a moment of truth. Here they usually face dilemmas arising from the fact that their threats or promises are incredible or inadequate. Different dilemmas are possible depending on whether or not there is an agreement. If there is an agreement (i.e., stated intentions implement every position), the possible dilemmas resemble those found in the prisoner’s dilemma game; they arise from characters distrusting each other’s declared intention to implement the agreement. If there is no agreement, more dilemmas are possible, resembling those in the game of chicken; they arise from the fact that a character’s threat or its determination to stick to its position and reject other positions may be incredible to another character.

Drama theory asserts that a character faced with a dilemma feels specific positive or negative emotions that it tries to rationalize by persuading itself and others that the game should be redefined in a way that eliminates the dilemma; for example, a character with an incredible threat makes it credible by becoming angry and finding reasons why it should prefer to carry out the threat; likewise, a character with an incredible promise feels positive emotion toward the other as it looks for reasons why it should prefer to carry its promise. Emotional tension leads to the climax, where characters re-define the moment of truth by finding rationalizations for changing positions, stated intentions, preferences, options or the set of characters. There is some experimental evidence to confirm this assertion of drama theory (see P. Murray-Jones, L. Stubbs and N. Howard, ‘Confrontation and Collaboration Analysis: Experimental and Mathematical Results’, presented at the 8th International Command & Control Research and Technology Symposium, June, 2003—from whose site it can be downloaded.

Six dilemmas (formerly called paradoxes) are defined, and it is proved that if none of them exist then the characters have an agreement that they fully trust each other to carry out. This is the fundamental theorem of drama theory. Until a resolution meeting these conditions is arrived at, the characters are under emotional pressure to rationalize re-definitions of the game that they will play. Re-definitions inspired by new dilemmas then follow each other until eventually, with or without a resolution, characters become players in the game they have defined for themselves. In game-theoretic terms, this is a ‘game with a focal point’ – i.e., it is a game in which each player has stated its intention to implement a certain strategy. This strategy is its threat (part of the threatened future) if an agreement has not been reached, and its promise (part of the agreement), if an agreement has been reached. At this point, players (since they are playing a game) decide whether to believe each other, and so to predict what others will do in order to decide what to do themselves.

Dilemmas defined in drama theory

The dilemmas that character A may face with respect to another character B at a moment of truth are as follows.

  1. A’s cooperation dilemma: B doesn’t believe A would carry out its actual or putative promise to implement B’s position.
  2. A’s trust dilemma: A doesn’t believe B would carry out its actual or putative promise to implement A’s position.
  3. A’s persuasion (also known as Deterrence) dilemma: B certainly prefers the threatened future to A’s position.
  4. A’s rejection (also known as Inducement) dilemma: A may prefer B’s position to the threatened future.
  5. A’s threat dilemma: B doesn’t believe A would carry out its threat not to implement B’s position.
  6. A’s positioning dilemma: A prefers B’s position to its own, but rejects it (usually because A considers B’s position to be unrealistic).

Relationship to game theory

Drama-theorists build and analyze models (called card tables or options boards) that are isomorphic to game models, but unlike game theorists and most other model-builders, do not do so with the aim of finding a ‘solution’. Instead, the aim is to find the dilemmas facing characters and so help to predict how they will re-define the model itself – i.e., the game that will be played. Such prediction requires not only analysis of the model and its dilemmas, but also exploration of the reality outside the model; without this it is impossible to decide which ways of changing the model in order to eliminate dilemmas might be rationalized by the characters.

The relation between drama theory and game theory is complementary in nature. Game theory does not explain how the game that is played is arrived at – i.e., how players select a small number of players and strategies from the virtually infinite set they could select, and how they arrive at common knowledge about each other’s selections and preferences for the resulting combinations of strategies. Drama theory tries to explain this, and also to explain how the ‘focal point’ is arrived at for the ‘game with a focal point’ that is finally played. On the other hand, drama theory does not explain how players will act when they finally have to play a particular ‘game with a focal point’, even though it has to make assumptions about this. This is what game theory tries to explain and predict.

See also

References

  • N. Howard, ‘Confrontation Analysis’, CCRP Publications, 1999. Available from the CCRP website.
  • P. Bennett, J. Bryant and N. Howard, ‘Drama Theory and Confrontation Analysis’ — can be found (along with other recent PSM methods) in: J. V. Rosenhead and J. Mingers (eds) Rational Analysis for a Problematic World Revisited: problem structuring methods for complexity, uncertainty and conflict, Wiley, 2001.

Further reading

  • J. Bryant, The Six Dilemmas of Collaboration: inter-organisational relationships as drama, Wiley, 2003.
  • N. Howard, Paradoxes of Rationality‘, MIT Press, 1971.