Pareto improvement and agenda control of sequential financial innovations

In an exchange economy under uncertainty with two periods, one physical good, and finitely many states of the world, we show that for every (complete or incomplete) market span there exists a sequence of securities such that if they are introduced into markets one by one, the prices of any security is not affected by the subsequent introduction of newer securities and they together generate the given market span. Since these securities generate no pecuniary externalities, this result implies that every stage of such sequential financial innovations is Pareto-improving. Its implications on financial innovations via voting are also explored.