731 Views

London Stock Exchange 

“Market Cap $9.02 B As of May 2014

At a Glance

  • Industry: Investment Services
  • Founded: 1802
  • Country: United Kingdom
  • CEO: Xavier Rolet
  • Website:www.londonstockexchange.com
  • Employees: 2,013
  • Sales: $1.37 B
  • Headquarters: London

Forbes Lists

#1107 Global 2000

  • #1944 in Profit
  • #30 in Assets
  • #1191 in Market value
Profile

London Stock Exchange Group Plc operates as an international exchange group. It operates a broad range of international equity, bond and derivatives markets, including: London Stock Exchange, Borsa Italiana, MTS, and the Pan-European equities and derivatives platform, Turquoise. It also develops trading platforms and capital markets software. The company operates through five business segments: Capital Markets, Technology Services, Post Trade Services, Information Services and Others. The Capital Markets segment includes Primary and Secondary markets. The Primary market in London and Italy provide companies and other issuers of equity and debt from around the globe with cost efficient access to some of the world’s deepest and most liquid pools of capital. The Secondary market provides trading services to investors and institutions by giving access to UK and Italian equities, pan-European equities, international depositary receipts, European corporate and government bonds and equity and index derivatives. The Technology Services segment includes, trading systems, market surveillance, post trade, smart order routing and market data solutions, and data centre and network services. The Information Services segment supply real time prices and trading data, creating the transparency and liquidity that are essential for market users. The Post Trade Services segment offers a full range of post trade services by providing risk management and efficiency for traders. This segment’s services include Clearing/CCP settlement and custody services. The Others segment includes reference data products, including Sedol, Unavista, Proquote and RNS. London Stock Exchange Group was founded in October 2007 and is headquartered in London, the United Kingdom.

“London Stock Exchange History

Coffee House

The Royal Exchange had been founded by Thomas Gresham on the model of the Antwerp Bourse, as a stock exchange. It was opened byElizabeth I in 1571.

During the 17th century, stockbrokers were not allowed in the Royal Exchange due to their rude manners. They had to operate from other establishments in the vicinity, notablyJonathan’s Coffee-House. At that coffee house, a broker named John Casting started listing the prices of a few commodities, exchange rates and certain key provisions such as salt, coal and paper in 1698. Originally, this was not a daily list and was only published a few days of the week.

This list and activity was later moved to Garraway’s coffee house. Public auctions during this period were conducted for the duration that a length of tallow candle could burn; these were known as “by inch of candle” auctions. As stocks grew, with new companies joining to raise capital, the royal court also raised some monies. These are the earliest evidence of organized trading in marketable securities in London.

Royal Exchange

After Gresham’s Royal Exchange building was destroyed in the Great Fire of London, it was rebuilt and re-established in 1669. This was a move away from coffee houses and a step towards the modern model of stock exchange.

The Royal Exchange not only housed brokers but also merchants and merchandise. This was the birth of a regulated stock market, which had teething problems in the shape of unlicensed brokers. In order to regulate these, Parliament brought out an act in 1697 that levied heavy penalties, both financial and physical to those brokering without a licence. It also set a fixed number of brokers (at 100), which was later increased as the size of the trade grew. This invariably led to several problems of its own, one of which was that the traders had started leaving the Royal Exchange, either by their own virtues or through expulsion and had started dealing in the streets of London. The street in which they were now dealing was known as Change or Exchange Alley which was suitably placed close to the Bank of England. Parliament tried to regulate this and ban the unofficial traders from the Change streets.

Companies became weary of “bubbles” when companies rose quickly and fell, so they persuaded Parliament to pass a clause preventing “unchartered” companies from forming.

After the Seven Years’ War (1756–1763), trade at Jonathan’s coffee house boomed again. In 1773, Jonathan, together with 150 other brokers, formed a club and opened a new and more formal “Stock Exchange” in Sweeting’s Alley. This now had a set entrance fee, through which traders could enter the stock room and trade securities. It was, however, not an exclusive location for trading, as trading also occurred in the Rotunda of the Bank of England. Fraud was also rife during these times and in order to deter such dealings, it was suggested that users of the stock room pay an increased fee. This was not met well and ultimately, the solution came in the form of annual fees and turning the Exchange into a Stock Subscription room.

The Subscription room created in 1801 was the first regulated exchange in London, but the transformation was not welcomed by all parties. On the first day of trading, non-members had to be expelled by a constable. In spite of the disorder, a new and bigger building was planned, at Capel Court.

William Hammond laid the first foundation stone for the new building on 18 May. It was finished on 30 December when “The Stock Exchange” was incised on the entrance.

First Rule Book

In the Exchange’s first operating years, on several occasions there was a clear set of regulations or fundamental laws missing for the Capel Court trading. In February 1812, the General Purpose Committee confirmed a set of recommendations, which later became the foundation of the first codified rule book of the Exchange. Even though the document was not a complex one, topics such as settlement and default were, in fact, quite comprehensive.

With its new governmental commandments and increasing trading volume in place, the Exchange was progressively becoming an accepted part of the financial life in the City. In spite of continuous criticism from newspapers and the public, the government used the Exchange’s organised market (and would most likely not have managed without) to raise the enormous amount of money in the wars against Napoleon.

After the war and facing a booming world economy, foreign lending to countries such as Brazil, Peru and Chile was a growing market. Notably, the Foreign Market at the Exchange allowed for merchants and traders to participate as well and The Royal Exchange hosted all transactions where foreign parties were involved. The ever-increasing of overseas business meant eventually the dealing in foreign securities had to be allowed within all of the Exchange’s premises.Foreign and regional exchanges

Just as London enjoyed its international growth forthcoming, the domestic Great Britain also benefited from the economic boom. Two other cities were particularly showing great business development, namely Liverpool and Manchester. Consequently, in 1836, both the Manchester and Liverpool Stock Exchanges were opened. These were also times when stockbroking was considered a real business profession and such attracted many entrepreneurs. Nevertheless, with booms came busts, and in 1835 the “Spanish panic” hit the markets, also followed by a second one two years later. Some stocks soared by some 10, 20 and 30 pct, a week.

The Exchange before the World Wars

By June 1853, both participating members and brokers were taking up so much space that the Exchange was now uncomfortably crowded and continual expansion plans were taking place. Being already extended west, east and northwards, it was then decided the Exchange needed an entire new establishment. Thomas Allason was appointed as the main architect, and in March 1854 the new brick building inspired from the Great Exhibition stood ready. This was a huge improvement of both surroundings and space, with twice the floor space available.

By the late 1800s, the telephone, ticker tape and the telegraph had been invented. Those new technologies led to a revolution in the work of the Exchange.

First World War

As the financial centre of the world, both the City and the Stock Exchange were hit hard by the outbreak of the First World War in 1914. Due to fears that borrowed money was to be called back and that foreign banks would demand their loans or raise interest, prices surged at first. The decision to close the Exchange for improved breathing space and to extend the August Bank Holiday to prohibit a run on banks, was hurried through by the Committee and Parliament, respectively. The Stock Exchange ended up being closed from the end of July until the New Year, introducing again street business as well as on the “challenge system”.

The Exchange was set to open again on 4 January 1915 under tedious restrictions, as transactions were to be in cash only. Due to the limitations and challenges on trading brought by the war, almost a thousand members quit the Exchange from 1914–18. When peace returned in November 1918, the post-war mood on the trading floor was generally cowed. In 1923 the Exchange received its own Coat of Arms, with the motto “Dictum Meum Pactum”, My Word is My Bond.

Second World War

In 1937, experiences from the First World War made officials at the Exchange draw up plans on how to handle a new war situation. One of the main concerns were air-raids and the subsequent bombing of the Exchange’s perimeters, and one suggestion was a move to Denham. This however, never took place. On the first day of September 1939, the Exchange closed its doors “until further notice” and two days later, the declaration of war was signed. Unlike from the prior war, the Exchange opened its doors again six days later, on the 7th of September.

As the war escalated into its second year, the concerns for air raids were greater than ever. Eventually, on the night of 29 December 1940 one of the greatest fires in London’s history took place. The Exchange’s floor was hit by a clutch of incendiary bombs, which fortunately were extinguished quickly. Trading on the floor was now drastically low and most was done over the phone to reduce the possibility of injuries.

The Exchange was only closed for one more day during wartime, in 1945 due to damage from a V-2 rocket. Nonetheless, trading continued in the house’s basement.

Post-war

After some turbulent times, the stock market enjoyed some remarkable years in the late 1950s and business was indeed booming. This pushed the officials to find a more suitable space for its new accommodation. The work on the new Stock Exchange Tower began in 1967. The Exchange’s new 321 feet high house had 26 storeys with Council and Administration at the top, and middle floors let out to affiliate companies. Queen Elizabeth II opened the building on 8 November 1972, and the finalised building was now a new City landmark, with its 23,000 sq ft trading floor.

1973 marked the year of changes for the Stock Exchange. Firstly, two trading prohibitions were to be abolished. A report from theMonopolies and Mergers Commission recommended the admittance of both women and foreign-born members on the floor. And secondly, in March the London Stock Exchange was to (formally) amalgamate with the 11 British and Irish regional exchanges, including the Scottish Stock Exchange. This expansion led to the creation of a new position of Chief Executive Officer, who after extensive search, was given to Robert Fell. Governmental changes also continued in 1991, when the governing Council of the Exchange was replaced with a Board of Directors drawn from the Exchange’s executive, customer and user base. This also marked the first time the trading name became “The London Stock Exchange”.

FTSE 100 Index (pronounced “Footsie 100”) was launched by the Financial Times and Stock Exchange partnership in February 1984. This turned out to be one of the most useful indices of all and tracked the movements of the 100 leading companies listed on the Exchange.

IRA bombing

On 20 July 1990 a bomb planted by the IRA exploded in the men’s toilets behind the visitors’ gallery. The area had already been evacuated and nobody was injured. About 30 minutes before the blast at 8:49 a.m., a man who said he was a member of the IRA told Reuters that a bomb had been placed at the exchange and was about to explode. Police officials said that if there had been no warning Friday, the human toll would have been very high. The explosion ripped a hole in the 23-story building on Threadneedle Street and sent a shower of glass and concrete onto the street. 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.

“Big Bang”

The biggest happening of the 1980s was the sudden deregulation of the financial markets in the UK in 1986. The phrase “Big Bang” was coined to describe measures including abolition of fixed commission charges and of the distinction between stockjobbers and stockbrokers on the London Stock Exchange, as well as change from an open outcry to electronic, screen-based trading.

In 1995 The Exchange launched the Alternative Investment Market, the AIM, to allow growing companies to expand to international markets. Two years later the Electronic Trading Service (SETS) was launched, bringing greater speed and efficiency to the market. Following this, the CREST settlement service was also launched. In 2000, the Exchange’s shareholders voted to become a public limited company, London Stock Exchange plc. The LSE also transferred its role as UK Listing Authority to the Financial Services Authority(FSA- UKLA)

EDX London, a new international equity derivatives business, was created in 2003 in partnership with OM Group. The Exchange also acquired Proquote Limited, a new generation supplier of real-time market data and trading systems.

The old Stock Exchange Tower became largely redundant with the advent of the Big Bang, which deregulated many of the Stock Exchange’s activities as it enabled an increased use of computerised systems that allowed dealing rooms to take precedence over face to face trading. Thus, in 2004, the House moved to a brand new headquarters inPaternoster Square, close to St Paul’s Cathedral.

In 2007 The London Stock Exchange merged with Borsa Italiana, creating the London Stock Exchange Group (LSEG). The Group operates out of the Stock Exchange’s headquarters in Paternoster Square.

Occupy London

The Stock Exchange in Paternoster Square was the initial target for the protesters of Occupy London on October 15, 2011. Attempts to occupy the square were thwarted by police. Police sealed off the entrance to the square as it is private property, a High Court injunction had previously been granted against public access to the square.

The protesters moved nearby to occupy the space in front of St Paul’s Cathedral. The protests were part of the global “Occupy” protests.”

*Information from Forbes.com and Wikipedia.org

**Video published on YouTube by “caspiandesign