The London Stock Exchange: A History

In the course of the twenty-five years since the end of the Second World War the London Stock Exchange carved out for itself a successful niche within the British financial system. The security of this niche depended upon preserving a close working relationship with the Bank of England and the Treasury, regardless of which political party formed the government of the day. In return for supervising the securities market this relationship gave the Stock Exchange the power necessary to preserve an essentially anti-competitive structure. It was able to impose and maintain a system of mandatory fixed charges upon its members, exclude potential rivals from direct access to the market, and limit the effect of those forces which undermined its control. Inevitably all this involved costs to the Stock Exchange, for its rules and regulations both stifled change among its own members and alienated those who might have joined. This had the consequence of reducing the role it performed within the securities market to a position where it could only command the buying and selling of long-dated UK government debt and the shares of British industrial and commercial companies. This did give it an important position within the domestic securities market and one capable of generating a safe and attractive income for its membership. However, all that was to change in the 1970s, despite the fact that the rivalry of the provincial stock exchanges was finally neutralized in that decade. A combination of technological change, international liberalization, growing discontent among institutional investors, and an unwillingness by the government to tolerate its restrictive practices, all conspired to pose a serious threat to the London Stock Exchange. It was forced to give way on a number of issues while among its own membership the demands for change gained momentum. Nevertheless, the structure of the Stock Exchange remained largely unaltered in the 1970s, which was itself no small feat considering the developments of that decade.

The management of the London Stock Exchange were well aware that constant vigilance, accompanied by appropriate action, was necessary if the position that had been carefully built up since the war was to be maintained. In July 1971 they noted that:

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