The London Stock Exchange: A History

By Ranald C. Michie | Go to book overview
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12
Big Bang

THE GOODISON/PARKINSON AGREEMENT

No event in the history of the London Stock Exchange has attracted more attention than Big Bang. On 27 October 1986 both fixed commissions and single capacity were abolished and these had been at the centre of Stock Exchange thinking for most of the twentieth century, and certainly since 1945. At the same time the 100 per cent external ownership of members was permitted. Whatever these changes might have meant for the rest of the City of London they certainly constituted a fundamental revolution for the London Stock Exchange. This was despite the fact that certain changes had already taken place especially in the field of international securities and international markets, where there had been limited relaxation of the rules covering both single capacity and fixed commissions. As early as 1970 members had been allowed to deal in overseas securities on equal terms with overseas competitors, and further relaxation of the rules did follow in 1983, in the wake of the abolition of exchange controls in 1979. It is clear that pressure for reform had been mounting in the 1970s, both within and outside the Stock Exchange, and this had brought results despite the opposition of many members worried about the consequences it would have for their business. Responsibility for the final transformation, when it did come, has been claimed for a variety of forces and by a variety of individuals. For some it is seen as the power of impersonal market forces whereby technological change and globalization destroyed the natural protection of a national stock exchange. Others have emphasized the political agenda and point to the role of Conservative politicians and their reforming zeal. A number see the guiding hand of central bankers with the Bank of England using its influence to enhance the competitive position of the City of London. Finally, there are those that see the process as an internal one and argue that the London Stock Exchange was already reforming itself and the interventions of others only delayed and distracted it.1 However, historical reality is a lot more complex

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I am very grateful to Sir Nicholas Goodison for reading this Chapter and making comments upon it, in terms of both substance and emphasis. However, the views expressed are my own.
1
Among the books seeking to explain and document Big Bang are: J. J. Fishman, The Transformation of Threadneedle Street: The Deregulation and the Reregulation of Britain's Financial Services ( Durham, NC 1993); G. Galletly and N. Richie, The Big Bang ( Plymouth 1988);

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