sign in sign up
<<
Home , FTSE Group, FTSE SmallCap Index, London Stock Exchange, Market capitalization

London Exchange The

What is the ?

The London Stock Exchange has quite simply been one of the worlds largest and most influential stock exchanges since its official founding in 1801. It is located in London, , , in , which is near the Thames River and the well-known St. Paul's Cathedral. The London Stock Exchange is unique in that it has both British as well as overseas listings. Its official name is London Stock Exchange Group plc, and it is headed by CEO Clara Furse and Chairman Christopher S. Gibson-Smith. The LSE has used an automated system of trading since 1997, and just switched to a faster, more reliable version of automated trading called TradElect, in 2007.

Origins and Time Line of the London Stock Exchange

The London Stock Exchange is one of the oldest exchanges in the World. The trade of shares in London began with the need to finance two voyages: The Muscovy 's attempt to reach China via the White Sea north of Russia, and the East India Company voyage to India and the east. The exchange quickly became one of London's most important financial institutions.

In 1698, stock dealers were expelled from the Royal Exchange for rowdiness. Those stock dealers started to operate in coffee shops, mainly Jonathan's Coffee shop.

In 1748, Jonathan's Coffee shop was burnt down.

By 1761, 150 stock brokers formed a club at Jonathan's Coffee shop to buy and sell shares.

The stock brokers built their own building in Sweeting's which had a trading floor on the main level and a coffee shop on the second floor in 1773. It was originally known as "New Jonathan's" but then was changed to "The Stock Exchange."

March 3, 1801 a formal membership subscription is introduced. This is the first day that regulated exchange started in London. This is the start of the modern Stock Exchange.

In 1802, the Stock Exchange is moved to a building near Capel Court.

The first codified rule book is created in 1812.

In 1836, the first regional exchanges were opened in Liverpool and Manchester.

In 1914, the Great War caused the London Stock Exchange to close from July until the New Year. The Stock Exchange Battalion of is formed. 1,600 men volunteered and 400 men never returned.

In 1923, the London Stock Exchange received their . Their motto is "Dictum Meum Pactum" which means "My Word is My "

In 1939, Stock Exchange is forced to close for 6 days because of the start of World War Two.

In 1945, the floor of the House was forced to close for a day due to damage cause by a V2 rocket. Trading continued in the basement.

In 1972, the Queen opened the new 26 storey office block. It now has a trading space of 23,000 square feet.

The first female members were added to the market in 1973.

In 1986, the deregulation of the market was known as the "Big Bang." The "Big Bang" now allowed ownership of member firms by an outside corporation. All firms become broker/dealers able to operate in a dual capacity. Minimum scales of commissions were abolished. Individual members ceased to have voting rights. Trading moved from being done face-to-face and is now done via the computer or telephone. The Exchange became a private limited company under the Companies Act 1985.

On July 20, 1990 a bomb planted by the Irish Republican Army exploded in the men's toilet behind the visitor's gallery.

In 1991, the governing Council of the Exchange was replaced with the Board of Directors.

In 1992, the visitor's gallery was officially closed.

SETS (Stock Exchange Electronic Trading Service) was launched and it produced greater speed and efficiency to the market in 1997.

In 2000, they transferred from UK Authority with HM Treasury to the Authority (FSA). Shareholders voted to become a , which changed the name to London Stock Exchange plc.

In 2003, EDX London was created; it's a new international equity derivatives , in partnership with OM Group. They also acquired Proquote Limited, which is a new generation supplier of real-time market data and trading systems.

In 2004, the London Stock Exchange moved to their current location near St. Paul's Cathedral.

In 2007, the London Stock Exchange merged with Borsa Italiana, creating Europe's leading equity platform. Jan. 18th, 2008- the London Stock Exchange formally opened the Exchange's representative office in . The establishment of a permanent presence in Beijing will enable the London Stock Exchange to build on its as the international market of choice for Chinese companies and strengthens the Exchange's ongoing commitment to one of its key overseas markets. In choosing to locate in Beijing, one of the world's fastest growing economies, the LSE feels that they have helped ensure that they will remain the world's most successful major exchange for capital raising by international companies. There are more Chinese companies on the LSE's market than on any other international exchange. The LSE has attracted 68 Chinese companies to London, and its new office in Beijing will help more Chinese companies expand their market .

Tracking the Exchange:

Certainly the best way to track the LSE is through the FTSE 100 . The index tracks the top 100 companies on the LSE by market capitalisation. FTSE is an acronym for ' Stock Exchange,' and the index is maintained by the FTSE Group. The FTSE 100 Index began on January 3rd, 1984, with a base value of 1000, and is currently at a value of approximately 6400.

FTSE 100 Index companies represent over 83% of the LSE whole market capitalisation. Although another LSE index, the FTSE All-Share Index, is more comprehensive, the FTSE 100 is the most prominently used as a benchmark for evaluation by financial professionals. Other indices of the LSE include the FTSE 250 Index, the FTSE 350 Index, and the FTSE SmallCap Index.

The FTSE 100's largest companies by market capitalisation include , BP, HSBC Holdings, GlaxoSmithKline, Group, and the Royal Bank of , respectively. Since December of 2006, the criteria for inclusion into the FTSE 100 is approximately £2.9 billion. A company in the FTSE 250 Index can be promoted if their market capitalisation upon admittance would immediately place them in the top 90 firms of the FTSE 100 Index.

Trading on the exchange takes place from 8:00am - 4:29pm.

Automated Trading:

As mentioned in the first section, the London Stock Exchange uses an automated system of trading, much like the American based . According to the LSE, automated trading programs were and instituted to execute your trading plans for you. This can include, but is not limited to, stop loss orders and target price orders. The automated trading system used by the LSE is known as TradElect and and has given the LSE greater abilities to develop and enhance their services. The key technical functions of TradElect include: increases in the speed and efficiency of trading, provides the framework for the rapid development of new markets and asset classes, enhances the market structure to better support order routing, , and , and finally extends functionality for order handling, quote management, and trade reporting. The advantages of TradElect have allowed the LSE to increase yearly trades by over 600,000! Further, they are able to complete and execute an automated trade in a mere 6 milliseconds.

TradElect is a relatively new automated trading system that was instituted in June of 20007.

Pursuit of the LSE by Prospective Merger Partners:

A number of companies have attempted to acquire the London Stock Exchange in the past three years. In January of 2005, Deutsch Borse Group made an offer to buy the LSE, cutting costs for the LSE's customers and allowing the LSE to remain regulated by the FSA. The offer never worked out, and the LSE would continue to receive bids. In December of 2005, the LSE rejected a bid of £1.6 billion from the Macquarie Bank. Soon after the Macquarie Bank offer, the LSE received another offer, this time from the American exchange NASDAQ. The £2.4 billion approach from NASDAQ was immediately rejected by the LSE. Despite NASDAQ's offer rejection, NASDAQ management struck a deal with the London Stock Exchange's largest shareholder, , to acquire the firm's 35.4 million shares. After buying Ameriprise Financial's shares of LSE, NASDAQ purchased an additional 2.69 million shares, for a total stake of 15%. Follow-up puchases by NASDAQ increased their stake to 25.1%, which was certainly seen as an effort to force LSE into negotiating.

United Kingdom financial policies forced NASDAQ to wait for a while before renewing its takeover effort, which stalled action for a period of time. By November 20, 2006, NASDAQ increased its ownership to 28.75% and attempted an offer at £12.43 per share, the minimum bid permitted. Again, the London Stock Exchange rejected the offer immediately, saying that it "substantially undervalues" the firm. By December of 2006, NASDAQ indicated it would be able to complete the deal with 50% or more of LSE's stock, instead of their initial projection of 90%. However, NASDAQ refused to raise their bid, citing a variety of reasons, and was ultimately rejected by LSE shareholders.

On August 20th, 2007, NASDAQ made the announcement that it was no longer planning to take over the London Stock Exchange. They further announced that they were looking for buyers of its 31% stake in the company. In September of 2007, NASDAQ sold majority of its shares to a company called , a company based in the United Arab Emirmates. Borse Dubai now owns 28% of the LSE.

Additional Information:

The London Stock Exchange is made up of over 3,000 companies located all over the world. 350 companies are from 50 different countries. Companies have the choice of four primary markets. These include:

1. The Main Market: The Main Market is established of companies of high performance, and the listing requirements are strict. Approximately 1,800 of the LSE's company's listing trade on the Main Market. The Main Market total is more than 3,500 billion. It is regarded by and companies as the world's most prestigious listing and trading environment. 2. The AIM: This market trades small-caps or new enterprises with high potential growth. 1,060 companies are listed on the market and had a capitalization of over 37 billion. 3. Professional Securities Market - A market for listed debt and depository receipts. 4. Specialist Fund Market - A market dedicated to specialized investment entities.

Some of FTSE 100 companies that are common names include: , , , BP, Intercontiential Hotels Group (Holiday Inn, Crowne Plaza), Pearson, RollsRoyce, Sainsbury, and .

Importance and Future in regards to London as a Global Financial Center: The London Stock Exchange is the most international of all exchanges. In 2004, EDX traded an average of 382,599 contracts a day. Its aim is to become the leading derivatives market in the world. As the London Stock Exchange expands and becomes more global, London also expands and becomes more global. The importance of the London Stock Exchange to London is that it brings companies from all over the world to trade in one location which causes the London economy to grow. The London Stock Exchange is very important to London as they both continue to grow.