The
London Stock Exchange is a
stock exchangeA stock exchange is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital...
located in
London[]London is the capital of England and the United Kingdom. It has been a major settlement for two millennia, and the history of London goes back to its founding by the Romans, when it was named Londinium. London's core, the ancient City of London, the 'square mile', retains its medieval boundaries...
,
United KingdomThe United Kingdom of Great Britain and Northern Ireland is a sovereign state located off the northwestern coast of continental Europe. It is an island country, spanning an archipelago including Great Britain, the northeastern part of Ireland, and many small islands...
. Founded in 1801, it is one of the largest stock exchanges in the world, with many overseas listings as well as British companies. The exchange is part of the London Stock Exchange Group and so sometimes referred to by the ticker symbol for the group,
LSE.
Its current premises are situated in
Paternoster SquarePaternoster Square is an urban development, owned by the Mitsubishi Estate Co., next to St Paul's Cathedral in the City of London, England. In 1942 the area, which takes its name from Paternoster Row, centre of the London publishing trade, was devastated by aerial bombardment in The Blitz during...
close to
St Paul's CathedralSt Paul's Cathedral is the Anglican cathedral on Ludgate Hill in the City of London and the seat of the Bishop of London. The present building dates from the 17th century and is generally reckoned to be London's fifth St Paul's Cathedral, not counting every major medieval reconstruction as a new...
in the
City of LondonThe City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...
.
Origin of share trading
The trade in shares in London began with the need to finance two voyages: The
Muscovy CompanyThe Muscovy Company , was a trading company chartered in 1555. It was the first major English joint-stock trading company, the precursor of the type of business that would soon flourish in England, and became closely associated with such famous names as Henry Hudson and William Baffin...
's attempt to reach
ChinaChina is a cultural region, an ancient civilization, and, depending on perspective, a national or multinational entity extending over a large area in East Asia....
via the
White SeaThe White Sea is an inlet of the Barents Sea on the northwest coast of Russia. It is surrounded by Karelia to the west, the Kola peninsula to the north, and the Kanin Peninsula to the northeast....
north of
RussiaRussia , officially known as both Russia and the Russian Federation , is a country in northern Eurasia . It is a semi-presidential republic, comprising 83 federal subjects...
, and the
East India CompanyThe East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China...
voyage to
IndiaIndia, officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the south, the Arabian Sea on the west, and the Bay of Bengal...
and the east.
Unable to finance these expensive journeys privately, the companies raised the money by selling shares to merchants, giving them a right to a portion of any profits eventually made.
Exchange
The idea soon caught on (one of the earliest was the Earl of Bedford's scheme to drain the fens). It is estimated that by 1695, there were 140 joint-stock companies. The trade in shares was centred around the City's Change Alley in two coffee shops: Garraway's and
Jonathan'sJonathan's Coffee-House in Change Alley is famous as the original site of the London Stock Exchange. The Coffee-House was founded by Jonathan Miles, in Exchange Alley, around 1680....
. The broker, John Castaing, published the prices of stocks and commodities called
The Course of the Exchange and other things in these coffee shops.
Licensing of brokers
In 1697, a law was passed to "restrain the number and ill-practice of brokers and stockjobbers" following a number of
insider trading"You want more insider trading, not less. You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that."said-Milton Friedman, laureate of the Nobel Memorial Prize in Economics...
and market-rigging incidents. It required all brokers to be licensed and to take an oath promising to act lawfully.
The South Sea Bubble
The Change Alley exchange thrived. However, it suffered a setback in 1720.
Much excitement was caused by the South Sea Company, stoked by brokers, the company's owner John Blunt and the government. Having set up the unprofitable company nine years previously, the government hoped to wipe out the large debts accumulated by offering shares to the public.
Shares in the company, which had started at £128 each at the start of the year, were soon fetching as much as £1,050 by June. The bubble inevitably burst, with share prices plunging to £175, then £124.
The incident caused outcry, forcing the government to pass legislation to prevent another bubble, and it took a long time for the stock exchange to recover.
Threadneedle Street and Capel Court
Jonathan's burnt down in 1748, and this, plus dissatisfaction with the overcrowding in the Alley, made the brokers build a New Jonathan's on
Threadneedle StreetThreadneedle Street is a road in the City of London, leading from an intersection with Poultry, Cornhill, King William Street and Lombard Street, to Bishopsgate....
, as well as charging an entrance fee. The building was soon renamed the Stock Exchange, only to be renamed again as the Stock Subscription Room in 1801, with new membership regulations.
However, this too proved unsatisfactory, and the exchange moved to the newly built Capel Court in the same year. The exchange had recovered by the 1820s, bolstered by the growth of the railways, canals, mining and insurance industries (there were, however, problems with
stagsStag profit is a stock market term used to describe a situation before and immediately after a company's IPO .A stag is a party or individual who subscribes to the new issue expecting the price of the stock to rise immediately upon the start of trading...
and dividend payments). Regional stock exchanges were formed across the UK.
BondsIn finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed maturity...
(or gilt-edged securities) also began to be traded.
Coat of Arms
It received its own
Coat of ArmsA coat of arms, more properly called an armorial achievement, armorial bearings or often just arms for short, in European tradition, is a design belonging to a particular person and used by them in a wide variety of ways. Historically, they were used by knights to identify them apart from enemy...
in 1923. Its motto is
dictum meum pactum, "My word is my bond".
The Stock Exchange Tower
The former
Stock Exchange TowerThe Stock Exchange Tower is a high-rise building located in the City of London at 125 Old Broad Street.-History:Standing at tall, with 26 floors, the tower was completed by Trollope & Colls in 1970 and opened by the Queen in 1972. It served as the headquarters and offices for the London Stock...
, based in
Threadneedle StreetThreadneedle Street is a road in the City of London, leading from an intersection with Poultry, Cornhill, King William Street and Lombard Street, to Bishopsgate....
/Old Broad Street was opened by
Queen Elizabeth IIElizabeth II is the queen regnant of sixteen independent states known informally as the Commonwealth realms: the United Kingdom, Canada, Australia, New Zealand, Jamaica, Barbados, the Bahamas, Grenada, Papua New Guinea, the Solomon Islands, Tuvalu, Saint Lucia, Saint Vincent and the Grenadines,...
in 1972 and housed the Trading Floor where traders would traditionally meet to conduct business.
This became largely redundant with the advent of the
Big BangThe phrase Big Bang, used in reference to the sudden deregulation of financial markets, was coined to describe measures including the abolition of the distinction between stockjobbers and stockbrokers on the London Stock Exchange by the United Kingdom government in 1986.This change in the rules of...
on 27 October 1986, which deregulated many of the Stock Exchange's activities. It eliminated fixed commissions on security trades and allowed securities firms to act as brokers and dealers. It also enabled an increased use of computerised systems that allowed dealing rooms to take precedence over face to face trading.
IRA bomb
On 20 July 1990 a bomb planted by the
IRAThe Provisional Irish Republican Army is an Irish republican paramilitary organisation which sought to remove Northern Ireland from the United Kingdom and bring about a united Ireland by force of arms and political persuasion...
exploded in the men's toilets behind the visitors' gallery. The area had already been evacuated and nobody was injured. The long term trend towards electronic trading had been reducing the Exchange's status as a visitor attraction and, although the gallery reopened, it was closed permanently in 1992.
Paternoster Square
In July 2004, the London Stock Exchange moved from
Threadneedle StreetThreadneedle Street is a road in the City of London, leading from an intersection with Poultry, Cornhill, King William Street and Lombard Street, to Bishopsgate....
to
Paternoster SquarePaternoster Square is an urban development, owned by the Mitsubishi Estate Co., next to St Paul's Cathedral in the City of London, England. In 1942 the area, which takes its name from Paternoster Row, centre of the London publishing trade, was devastated by aerial bombardment in The Blitz during...
(EC4) close to
St Paul's CathedralSt Paul's Cathedral is the Anglican cathedral on Ludgate Hill in the City of London and the seat of the Bishop of London. The present building dates from the 17th century and is generally reckoned to be London's fifth St Paul's Cathedral, not counting every major medieval reconstruction as a new...
, still within the "Square Mile" (the
City of LondonThe City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...
).
It was officially opened by Queen Elizabeth II once again, accompanied by The
Duke of EdinburghThe Prince Philip, Duke of Edinburgh is the husband of Queen Elizabeth II. Philip was originally a royal prince of Greece and Denmark, and thus a member of the Danish-German House of Schleswig-Holstein-Sonderburg-Glücksburg, but renounced these titles shortly before his marriage and adopted the...
, on 27 July 2004. The new building contains a specially commissioned dynamic sculpture called "The Source", by artists
GreyworldGreyworld are a collective of London based artists who are interested in public-activated art, sculpture and interactive installations. Although often varied in their approach, their work is typically subtle and environmentally reflective. The following descriptions are of a few selected works.-...
.
Nasdaq
In December 2005, the London Stock Exchange rejected a £1.6 billion takeover offer from Macquarie Bank. The London Stock Exchange described the offer as "derisory", a sentiment echoed by shareholders in the exchange. Shortly after Macquarie withdrew its offer, the LSE received an unsolicited approach from
NASDAQThe National Association of Securities Dealers Automated Quotations, known as NASDAQ, is an American stock exchange. It is the largest electronic screen-based equity securities trading market in the United States...
valuing the company at £2.4 billion. This too it duly rejected. NASDAQ later pulled its bid, and less than two weeks later on 11 April 2006, struck a deal with LSE's largest shareholder,
Ameriprise FinancialAmeriprise Financial, Inc. is a company that offers financial advice and products. It is the successor to American Express Financial Advisors , which was a subsidiary of the American Express Company. In 2005, American Express launched the spin-off of AEFA as an independent company. The new name...
's Threadneedle Asset Management unit, to acquire all of that firm's stake, consisting of 35.4 million shares, at £11.75 per share. NASDAQ also purchased 2.69 million additional shares, resulting in a total stake of 15%. While the seller of those shares was undisclosed, it occurred simultaneously with a sale by
Scottish WidowsScottish Widows is an investment company located in Edinburgh, Scotland, now a subsidiary of the Lloyds Banking Group.Scottish Widows Fund and Life Assurance Society opened in 1815 in what is now Chambers Street, as Scotland's first mutual life office...
of 2.69 million shares. The move was seen as an effort to force LSE to the negotiating table, as well as to limit the Exchange's strategic flexibility.
Subsequent purchases increased NASDAQ's stake to 25.1%, holding off competing bids for several months. United Kingdom financial rules required that NASDAQ wait for a period of time before renewing its effort. On 20 November 2006, within a month or two of the expiration of this period, NASDAQ increased its stake to 28.75% and launched a hostile offer at the minimum permitted bid of £12.43 per share, which was the highest NASDAQ had paid on the open market for its existing shares. The LSE immediately rejected this bid, stating that it "substantially undervalues" the company.
NASDAQ revised its offer (characterized as an "unsolicited" bid, rather than a "hostile
takeoverIn business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
attempt") on 12 December 2006, indicating that it would be able to complete the deal with 50% (plus one share) of LSE's stock, rather than the 90% it had been seeking. The U.S. exchange did not, however, raise its bid. Many
hedge fundA hedge fund is an investment fund open to a limited range of investors that is permitted by regulators to undertake a wider range of investment and trading activities than other investment funds, and that, in general, pays a performance fee to its investment manager...
s had accumulated large positions within the LSE, and many managers of those funds, as well as Furse, indicated that the bid was still not satisfactory. NASDAQ's bid was made more difficult because it had described its offer as "final", which, under British bidding rules, restricted their ability to raise its offer except under certain circumstances.
In the end, NASDAQ's offer was roundly rejected by LSE shareholders. Having received acceptances of only 0.41 per cent of rest of the register by the deadline on 10 February 2007, Nasdaq's offer duly lapsed
http://www.londonstockexchange.com/LSECWS/IFSPages/MarketNewsPopup.aspx?id=1403962&source=RNS. Responding to the news, Chris Gibson-Smith, the LSE's chairman, said: "The Exchange’s strategy has produced outstanding results for shareholders by facilitating a structural shift in volume growth in an increasingly international market at the centre of the world’s equity flows. The Exchange intends to build on its exceptionally valuable brand by progressing various competitive, collaborative and strategic opportunities, thereby reinforcing its uniquely powerful position in a fast evolving global sector."
On Monday, 20 August 2007, NASDAQ announced that it was abandoning its plan to take over the LSE and subsequently look for options to divest its 31% (61.3 million shares) shareholding in the company in light of its failed takeover attempt. In September 2007, NASDAQ agreed to sell the majority of its shares to
Borse DubaiBorse Dubai is a stock exchange in the United Arab Emirates.It is the holding company for Dubai Financial Market and NASDAQ Dubai...
, leaving the
United Arab EmiratesThe United Arab Emirates is a federation of seven emirates situated in the southeast of the Arabian Peninsula in Southwest Asia on the Persian Gulf, bordering Oman and Saudi Arabia. The UAE consists of seven states, termed emirates, which are Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras...
-based exchange with 28% of the LSE.
Structure
The London Stock Exchange has four core areas:
Equity markets - enables companies from around the world to raise capital. There are four primary markets; Main Market,
Alternative Investment MarketThe Alternative Investment Market is a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the Main Market. The AIM was launched in 1995 and has raised almost £24 billion for more than 2,200 companies...
(AIM), Professional Securities Market (PSM) and Specialist Fund Market (SFM).
Trading services - highly active market for trading in a range of securities, including UK and international equities, debt, covered warrants, exchange traded funds (ETFs), Exchange Traded Commodities (ETCs), reits, fixed interest, contracts for difference (CFDs) and depositary receipts.
Information Services - The London Stock Exchange provides real-time prices, news and other financial information to the global financial community.
Derivatives - A major contributor to derivatives business is EDX London, created in 2003 to bring the cash equity and derivatives markets closer together.
Hours
Normal trading sessions are from 08:00 to 16:30 every day of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.
See also
- London Stock Exchange Group plc
The London Stock Exchange Group plc is the leading diversified stock exchange group in Europe. It owns the Borsa Italiana and London Stock Exchanges. It is a member of the FTSE 100 Index as of 22 June 2009.-History:...
- Exchange Alley
- Chi-X
Chi-X is an order-driven pan-European equity exchange, or Multilateral trading facility . It is an alternative exchange and trades equities that are listed on primary exchanges such as the London Stock Exchange, Frankfurt Stock Exchange, Euronext and OMX...
- Borsa Italiana
The Borsa Italiana S.p.A., based in Milan, is Italy's main stock exchange. It was privatised in 1997 and acquired by the London Stock Exchange in 2007...
- Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid/offer spread, or turn....
- Alternative Investment Market
The Alternative Investment Market is a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the Main Market. The AIM was launched in 1995 and has raised almost £24 billion for more than 2,200 companies...
- List of stock exchanges
- Mandatory quote period
On the London Stock Exchange, the period during which all registered market-makers are obliged to display prices.In this period market makers on the Exchange’s quote driven SEAQ and SEAQ International services are obliged to make a firm two-way quote for the securities in which they are registered....
- PSQ Analytics
PSQ Analytics is an equity research service, launched in March 2009, with the objective of providing research on smaller quoted companies listed on the London Stock Exchange's Main Market and Alternative Investment Market . This service is supported by the LSE with 3 independent research firms, viz...
External links