The London Stock Exchange is the oldest existing in Europe. In addition, it is famous for its internationality: according to 2004, it included 340 firms from 60 countries. Despite the fact that there are 21 more exchanges in the UK, the London is still the most popular. We will tell you about it in this article.
Structure
The London Stock Exchange consists of three main markets: official, unregistered securities and alternative investments.
- Official market. The largest segment, designed for companies with a certain history of existence and substantial capital. It has two divisions: for international companies and for domestic.
- The market of unregistered securities. It appeared in 1980 to provide services to small firms. Unfortunately, this experiment was unsuccessful, and due to low liquidity in the early 90s, this market was canceled.
- Alternative investment market. It arose in mid-1995 to serve small firms. There were no special requirements for new candidates in terms of the minimum history of the company and the number of shares already put into circulation. The requirements for minimum capital were also reduced. But liberalization in 1997 led to the London Stock Exchange tightening stock placement rules.
History
From the beginning of the 16th century, securities trading was carried out in coffee houses or on the streets. In 1566, Thomas Gresham, who came from Holland, proposed to build a separate room for these purposes. He said that he would do it at his own expense, but demanded that local residents and the government find a suitable territory. The amount of money collected in the amount of 3, 500 pounds was purchased the right piece of land. In 1570, the Royal Exchange opened.
New exchange
Unfortunately, the Great Fire of London destroyed it, and the new building was rebuilt only in 1669. A gallery was also organized, consisting of 200 places for rent. In the basement of the building stored goods brought. In 1698, brokers were expelled from the exchange building for obscene behavior (importunity and noise). For negotiations and conclusion of transactions, the coffee house “At Jonathan” was chosen. Then the first price lists for securities appeared. After 50 years, the coffee shop “At Jonathan” repeated the fate of the very first exchange - it burned down. However, visitors rebuilt the building on their own. In 1773, near a coffee shop, brokers rebuilt a new building, dubbing it “New Jonathan” (later the name was changed to “Stock Exchange”).
20th century exchange
World War I significantly crippled European stock markets. The London Stock Exchange closed the latest and a year later (in 1915) resumed its work. To ensure security, a volunteer rifle battalion was formed. In total there were 400 people. One in four died on the battlefields. By the 60s, the number of operations and personnel had expanded so much that the exchange management decided to build a new 26-story building. Construction lasted 12 years, and in 1972, the Queen of England herself opened the new structure.
In 1987, fundamental changes took place on the exchange. The most significant of them were: the conversion of physical trading into electronic (SEAQ system), the abolition of the minimum commission border, the permission for exchange members to combine broker and dealer functions. Thanks to the electronic SEAQ system, brokers did not have to go into the trading room. They could do this in their office.
By the end of 1997, the London Stock Exchange quotes had completely switched to electronic format. SETS computer trading system has increased the speed of operations and overall performance.
London Non-Ferrous Metals Exchange
It was founded during the Industrial Revolution of 1877. Now the London Stock Exchange of non-ferrous metals is considered the most important European trading center. It has come a long way from simple to forward (and then futures) transactions. All this allows consumers and manufacturers of industrial metals to extinguish possible losses and hedge risks during price spikes. Transactions can be made on options, futures and cash commodities.
The exchange is located in the old building of Plantation House and still preserves many traditions of the past. The operating room is made in the form of a circle, which determines the "circular membership" of participants in trading operations. Despite the advent of electronic systems, deals are still being made by shouting. Metal prices are voiced in the same way. The London Stock Exchange at Plantation House has a special “sign language” that brokers use during the hype so as not to confuse the orders they give and receive.
Gold market
There is also a precious metal traded by the London Stock Exchange - gold. It always stood apart in this institution. Representatives of five firms gather in a separate room for bidding. The lead chairman offers the price, and the "five" expresses readiness to conclude deals. After all approvals and approvals, fixed prices are announced, at which contracts will be concluded. In a similar pattern, copper is sold and bought. The London Metal Exchange is certainly one of the most famous British financial institutions. But there are three more institutions that are worth mentioning separately.
London Oil Exchange
Until 1970, the energy market was quite stable. But as a result of the oil embargo (1973-1974), the formation of OPEC and the Arab-Israeli war, oil producers lost control of prices. Therefore, in the early 80's. The International Petroleum Exchange was founded in London. The main reason for its appearance is the increased volatility of oil prices. A non-standard location was explained by an increase in oil production in the North Sea.
The exchange offers both options for unleaded gasoline, gas oil, oil, and futures contracts. Its main feature is the possibility of exchanging the cash market position for a futures position, provided that this exchange occurs after hours. The second feature is a long working day (until 20:15). This schedule allows brokers to enter into arbitration contracts with the United States.
British Options and Futures Exchange
Initially, it had a completely different name: the London Mercantile Exchange. This establishment represents the market of commodity derivatives and agricultural products of the United Kingdom. Of course, in terms of volume and size, it is significantly inferior to its foreign counterparts (for example, the Chicago Stock Exchange), but this absolutely does not interfere with a significant share of transactions in Europe.
This exchange appeared in the mid-20th century on the basis of “terminal associations” that conducted futures transactions on several product lines. Later, it absorbed almost all local markets, and even took part of the markets from its Baltic colleagues (derivatives for ship freight and potatoes). Prices on the London Stock Exchange of options and futures are quite favorable. It is possible to conclude transactions both on ordinary (barley, wheat, pork, etc.), and on colonial goods (soy, sugar, coffee).
International Options and Futures Exchange
There is a separate options market in Britain, but it works mainly with Sweden. A wide range of assets are traded on the International Options and Futures Exchange.
Until 1992, these transactions were handled by the operating room of the London Stock Exchange. Then everything was moved to the building on Cannon Street. Most of the products of this exchange are related to bonds and credit instruments, and a certain part of transactions relates to stock futures contracts.
The FTSE 100 English stock index is actively trading on the International Exchange. Its important feature is the ability to work with both European and American options. Until recently, it had the status of the best exchange in Europe in terms of technical equipment.
The International Options and Futures Exchange is Britain's central derivatives market and provides a high level of liquidity for bonds in Japan, the USA, Germany and Italy. But, unlike American institutions, it does not deal with foreign exchange derivatives contracts.
Once exchanges began with informal meetings in places of conclusion of transactions. Now they have become formalized financial institutions offering clients a wide range of various services. As they developed, there appeared rigid settlement systems and strict rules minimizing the risks of participants.
Most British exchanges still do not bring significant profits. Their liability is limited to ordinary guarantees (sometimes in the form of securities). The cleaning operations of these institutions are handled by the London Clearinghouse. It is she who provides guarantees from the insurance fund. At the end of 2000, its size was 150 million pounds.
