The London Stock Exchange: A History

The London Stock Exchange: A History

The London Stock Exchange: A History

The London Stock Exchange: A History

Synopsis

In 2001, the London Stock Exchange will be 200 years old, though its origins go back a century before that. This book traces the history of the London Stock Exchange from its beginnings around 1700 to the present day, chronicling the challenges and opportunities it has faced, avoided, or exploited over the years. Throughout, this history seeks to blend an understanding of the London Stock Exchange as an institution with that of the securities market of which it was, and is, such an important component. One cannot be examined satisfactorily without the other. Without a knowledge of both, for example, the causes of the `Big Bang' of 1986 would forever remain a mystery. However, the history of the London Stock Exchange is not just worthy of study for what it reveals about the interaction between institution and market. Such was the importance of the London Stock Exchange that its rise to world dominance before 1914, its decline thereafter, and its renaissance from the mid-1980s, explain a great deal about Britain's own economic performance and the working of the international economy. For the first time a British economic institution of foremost importance is studied throughout its entire history, with regard to the roles played and the constraints under which it operated, and the results evaluated against the background of world economic progress.

Excerpt

The 'Big Bang' reforms at the Stock Exchange in 1986 were radical and essential. They came about chiefly because, following the abolition of exchange controls in the United Kingdom in 1979, the buying and selling of securities became more and more international. London, with its centuries-old tradition of international trade and investment, was a magnet for this business. But the London Stock Exchange's rules, which governed dealings in securities by its members were out of kilter with the method of operation of large market practitioners outside the Exchange, principally the big United States broking houses and continental European banks. Members of the London Exchange could not hope to compete in internationalized markets in stocks and shares if they continued to be bound by rules which did not reflect less restrictive international practices.

Ways had to be found, therefore, to maintain the London Exchange's traditional place in international securities markets, and to attract more of the growing market in overseas equities into London. If ways could be found, London would attract not only more of the secondary market in international securities but also, consequently, more of the primary money-raising business and more of the world's fund management business. If there had been no reforms, the London Exchange would have declined and London would have stood less of a chance of becoming the leading financial market in our time zone. So the Stock Exchange's rules were altered to attract the big international houses into membership and to allow everyone to compete on equal terms.

At the same time, the reforms needed to reflect the huge and rapid advances in technology, and particularly in the speed of communication. When I began work in the City of London in the 1950s, the telephone was slow and expensive, trunk-dialling did not exist and calls abroad had to be booked ahead. Many urgent messages were conveyed by telegram. By the 1980s, the world had shrunk, anyone could be instantly dialled, and information could be transmitted at the press of a button anywhere in the world. The effects of accurate up-to-date information and instant access to counterparties all over the world were profound. Money could move across frontiers in seconds, and did.

So in 1986 the London Exchange introduced a computerized price display system and a telephone market which did away with the traditional face- to-face trading-floor. The loss of the trading-floor to television news-screens was perhaps the most graphic public evidence of the 'Big Bang' reforms.

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