London Stock Exchange: history of creation

The London Stock Exchange is the oldest one in Europe. In addition, it is famous for its internationality: according to 2004, it included 340 companies from 60 countries. Despite the fact that in the UK there are 21 more exchanges, the most popular still remains London. About it, we'll tell you in this article.

Structure

The London Stock Exchange consists of three main markets: official, unregistered securities and alternative investments.

• The official market. The largest segment, intended for firms with a certain history of existence and substantial capital. It has two divisions: for international companies and for domestic companies.
• The market of unregistered securities. 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.
• The market of alternative investments. Has arisen in the middle of 1995 for service of small firms. The new candidates were not presented with special requirements in terms of the minimal history of the company's activities and the number of shares that had already been put into circulation. The requirements to the minimum capital were also reduced. But the liberalization of 1997 led to the London Stock Exchange tightening the rules for the placement of shares.

History

Since the beginning of the 16th century, securities were traded in coffee houses or on the streets. In 1566 Thomas Gresham, who came from Holland, proposed building a separate room for these purposes. He said that he would do it at his own expense, but he demanded that the locals and the government find a suitable territory. For the collected amount of money in the amount of 3,500 pounds was purchased the right piece of land. In 1570, the Royal Exchange was opened.

New Exchange

Unfortunately, the Great London fire destroyed it, and the new building was rebuilt only in 1669. Also, a gallery was organized, consisting of 200 places for rent. In the basement of the building, the goods were stored. In 1698, brokers were expelled from the stock exchange for obscene behavior (importunity and noise). To negotiate and conclude deals, the coffee shop "At Jonathan" was chosen. Then the first price lists appeared on securities. After 50 years, the coffee shop "U Jonathan" repeated the fate of the very first stock exchange - it burned down. However, visitors restored the building on their own. In 1773, near the coffee shop, brokers built a new building, dubbed it "New Jonathan" (later the name was changed to the "Stock Exchange").

Exchange in the 20th century

The First World War significantly undermined the European stock markets. The London Stock Exchange closed the very last one and a year later (in 1915) it resumed its work. To ensure security, a battalion of volunteers was formed. In total there were 400 people. Every fourth died on the battlefield. By the 1960s, the number of operations and personnel had expanded to such an extent that the management of the exchange decided to build a new 26-storey building. The construction lasted 12 years, and in 1972 the Queen of England herself opened the new structure .

In 1987 there were cardinal transformations on the stock exchange. The most significant of them were: the transfer of physical trading in electronic (SEAQ system), the cancellation of the minimum border of commissions, permission to members of the exchange to combine brokerage and dealer functions. Thanks to the SEAQ electronic system, brokers did not have to go into the hall for auction. They could do this in their office.

By the end of 1997, the quotes of the London Stock Exchange were completely transferred to the electronic format. Computer trading system SETS increased the speed of operations and overall performance.

London Stock Exchange of Non-ferrous Metals

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 the simplest to the forward (and then futures) deals. All this allows consumers and manufacturers of industrial metals to extinguish possible losses and hedge risks at price jumps. You can make transactions on options, futures contracts and cash.

The Exchange is located in the ancient building 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 the participants in trading operations. Despite the advent of electronic systems, transactions are still concluded by the method of cries. Similarly, voice and prices for metals. The London Stock Exchange on Plantation House has a special "sign language" that brokers use during the rush, so as not to confuse the orders given and received.

Gold market

There is also a precious metal traded by the London Stock Exchange - gold. It always stood in this institution apart. Representatives of five companies are going to take part in a separate room for the auctions. The chairman proposes a price, and the "five" expresses readiness to conclude deals. After all approvals and approvals, fixed prices are announced for which contracts will be concluded. According to a similar scheme, 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 over 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 the increase in oil production in the North Sea.

The Exchange offers both options for unleaded gasoline, gasoil, oil, and futures contracts. Its main feature is the possibility of exchanging the position of the cash market for a futures position, provided that this exchange occurs during non-working hours. The second feature is a long working day (until 20:15). Such a 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 institution is a market for commodity derivatives and agricultural products in the United Kingdom. Of course, in terms of volume and size, it is significantly inferior to its foreign counterparts (for example, the Chicago Exchange), but this does not prevent a significant proportion of transactions in Europe.

This exchange appeared in the middle of the 20th century on the basis of "terminal associations", which conducted futures on several product lines. Later, it absorbed almost all local markets, and even took a part of the markets from the Baltic colleagues (derivatives on ship freight and potatoes). Prices on the London Stock Exchange of options and futures are quite profitable. You can conclude transactions as usual (barley, wheat, pork, etc.), and colonial goods (soy, sugar, coffee).

International Exchange of Options and Futures

In Britain there is a separate options market, but it works mainly with Sweden. Transactions on a wide range of assets are held at the International Exchange of Options and Futures.

Until 1992, these transactions involved the operating room of the London Stock Exchange. Then everything was moved to the building on Cannon Street. The largest part of the products of this exchange is connected with bonds and credit instruments, and a certain part of transactions concerns futures contracts for shares.

The English stock market actively trades on the FTSE 100 stock index. Its important feature is the possibility of working with both European and American options. Until recently, it had the status of the best stock exchange in Europe in terms of technical equipment.

The International Options and Futures Exchange is the UK's central market for derivatives and provides a high level of liquidity for bonds in Japan, the US, Germany and Italy. But, unlike American institutions, it does not deal with contracts on currency derivatives.

Once the stock exchanges began with informal meetings in the places of bargaining. Now they have become formalized financial institutions offering clients a wide range of different services. As development evolved, 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 London clearing house is engaged in cleaning operations of these institutions. It is she who provides guarantees from the insurance fund. At the end of 2000, its size was 150 million pounds sterling.

Conclusion

Now the London Stock Exchange is one of the five largest institutions of this type in the world. They trade shares of 300 companies from 60 countries. If we look at Russian firms, the greatest demand is for Lukoil, Gazprom and Rosneft. Since 2005, trading in options and futures on the RTS index has been launched on the exchange .