History of the London Stock Exchange

The London Stock Exchange today lies at the heart of the global financial community it has approximately 3,000 companies worldwide trading on its markets. Built on integrity, expertise, market knowledge and consistently leading the way in developing a well-regulated stock market, it can trace its history back more than 300 years.

In 1571 the Royal Exchange was opened by Elizabeth I, it was founded by Thomas Gresham based on the Antwerp Bourse, the first public building used exclusively for financial and commodity trading. In 1669 Gresham's Exchange was destroyed in the Great Fire of London, was rebuilt and became a model for modern stock exchanges.

During the 17th century, ill-mannered stockbrokers were barred from the Royal Exchange; this led to problems, one of which was traders started dealing from other establishments in the vicinity, namely Jonathan's Coffee House. Jonathan’s was opened in 1680 and soon began to print their own news sheet, with articles relevant to their clientele who were mostly City businessmen.

Trading in stocks wasn’t new, the coffee houses employed boys to go to the docks for news from the cargo boats or befriend servants of the big merchants for information. When they heard anything they reported back to the coffee house where their findings were displayed on a board behind the bar. In 1698 a broker, John Castaing, who spent a lot of time at Jonathan's started listing the prices of commodities. Castaing’s list called The Course of Exchange and Other Things is the earliest evidence of organised trading in London and the publication continued for almost a century.

In 1748 Jonathan's burned down, ending an era and a new Jonathan's was built by the brokers. It was close to London's original livestock market, the two combined and the London Stock Market was born.

After the Seven Years War, trade at Jonathan's boomed and a group of stock brokers and jobbers formed a club to buy and sell shares. In 1773, they opened a formal "Stock Exchange" in Sweeting's Alley. This had a dealing room on the ground floor and a coffee room above. It charged an entrance fee that allowed traders to enter the stock room and trade securities. In 1802 The Exchange moved into a new building, it was the first formally regulated exchange in London and in 1812 the first codified rule book was created the Exchange was now an accepted part of the financial life in the City.

Just as London enjoyed the economic boom other cities were also showing great business development and in 1836 Liverpool and Manchester opened Stock Exchanges. At this time stock broking was considered a real business profession. By 1853 there were so many members and brokers the Exchange needed larger premises in 1854 a new building inspired from the Great Exhibition was acquired.

By the late 1800s, the telephone, ticker tape and the telegraph had been invented which revolutionised the work of the Exchange.

As the centre of the financial world, the City and Stock Exchange were hit hard by the outbreak of war. When peace finally returned, the mood on the trading floor was quiet as almost a thousand members had left the Exchange between 1914-18.

The Stock Exchange received its Coat of Arms, the motto “Dictum Meum Pactum” (My Word is My Bond) in1923.

On 1st September 1939, the Stock Exchange closed “until further notice” two days later, war was declared. Unlike the earlier war, the Exchange opened just six days later. During the second year of war the Exchange’s floor was hit by incendiary bombs, which were extinguished quickly and nobody was hurt as trading was low and mostly done over the phone.

During the 1950s the stock market was booming which again made it necessary to find new accommodation. Work on the Stock Exchange Tower began in 1967 and the 26-storey office block was opened by Queen Elizabeth II in 1972.

1973 marked the year when two trading prohibitions were abolished. The Monopolies and Mergers Commission recommended the admittance of both women and foreign-born members on the floor and the London Stock Exchange was formally amalgamated with the 11 British and Irish regional exchanges.

The biggest happening of the 1980s was the deregulation of the UK financial markets. The phrase Big Bang was coined to describe abolition of fixed commission charges, the distinction between stockjobbers and stockbrokers, as well as change to electronic, screen-based trading. The FTSE 100 Index was launched and tracked the movements of the 100 leading companies listed on the Exchange.

In 1995 The Exchange launched AIM, to allow growing companies to expand to international markets. Two years later Electronic Trading (SETS) was launched to bringing greater speed and efficiency to the market.

The year of the new millennium, 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. The old Stock Exchange became redundant with the advent of the Big Bang and in 2004, moved to new headquarters in Paternoster Square.

In October 2007 the Exchange merged with Borsa Italiana, creating Europe's leading diversified exchange business, London Stock Exchange Group. The Group operates out of the Stock Exchange's headquarters in Paternoster Square.

The LSE is proof that from something small, a giant can be built. From its roots in the 17th Century coffee houses of London, the London Stock Exchange has grown to become the City’s most important and one of the oldest financial institution in the world.

date added: 19/03/2013

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