How financial products organize spatial networks: Analyzing collateralized debt obligations and collateralized loan obligations as ‘networked products'

During the 2010s, Collateralized Loan Obligations (CLOs) rapidly became a trillion-dollar industry, mirroring the growth profile and peak value of its cousin – Collateralized Debt Obligations (CDOs) - in the 2000s. Yet, despite similarities in product form and growth trajectory, surprisingly little is known about how these markets evolved spatially and relationally. This paper fills that knowledge gap by asking two questions: how did each network adapt to achieve scale at speed across different jurisdictions; and to what extent does the spatial and relational organization of today’s CLO structuration network, mirror that of CDOs pre-crisis? To answer those questions, we draw on the global financial networks (GFN) approach, developing our own concept of the networked product to explore the agentic qualities of CDOs and CLOs – specifically how their technical and regulatory ‘needs’ shape the roles and jurisdictions enrolled in a GFN. We use social network analysis to map and analyze the evolving spatial and relational organization that nurtured this growth, drawing on data harvested from offering circulars. We find that CDOs spread from the US to Europe through a process of transduplication – that similar role-based network relations were reproduced from one regulatory regime to another. We also find a strong correlation between pre-crisis CDO- and post-crisis CLO-GFNs in both US$- and €-denominations, with often the same network participants involved in each. We conclude by reflecting on the prosaic way financial markets for ostensibly complex products reproduce and the capacity for network stabilities to produce market instabilities.