Understanding the London Stock Exchange (LSE): Key History and Events

What Is the London Stock Exchange (LSE)?

The London Stock Exchange (LSE) is one of the world's oldest and most significant exchanges and the U.K.'s primary market, with origins more than 300 years ago.

It modernized through the 1986 "Big Bang" reforms and later expanded its cross-border reach through milestones like the 2007 merger with Milan's Borsa Italiana to form the London Stock Exchange Group, supporting international listings and investment flows.

Exploring the London Stock Exchange's Rich History

London has long been one of the world's leading financial cities, well-known as a hub for international trade, banking, and insurance. The history of the London Stock Exchange (LSE) goes back to 1698 when broker John Castaing began posting the prices of stocks and commodities at Jonathan's Coffee House, which was a popular meeting place for businessmen to conduct trades. Castaing called his price list "The Course of the Exchange and Other Things."

By 1801 it became clear that a formal system was needed to deter fraud and unscrupulous traders. Brokers agreed to a set of rules and paid a membership fee to belong to the exchange, thus paving the way for the first regulated stock exchange in London.

Through its primary markets, the London Stock Exchange (LSE) provides cost-efficient access to some of the world’s deepest and most liquid pools of capital. It is home to a wide range of companies and provides electronic equities trading for listed companies.

The LSE is the most international of all stock exchanges with thousands of companies from more than 60 countries, and it is the premier source of equity-market liquidity, benchmark prices, and market data in Europe. Linked by partnerships to international exchanges in Asia and Africa, the LSE intends to remove cost and regulatory barriers from capital markets worldwide.

The Impact of the "Big Bang" on the LSE

On Oct. 27, 1986, the U.K. government deregulated the London stock market. Called the "Big Bang," this deregulation replaced open outcry with electronic trading on the LSE. The new system was efficient and faster, allowing trading volumes to increase and enabling the LSE to successfully rival other global exchanges, such as the New York Stock Exchange (NYSE).

The Big Bang was part of the government's reform program to eliminate overregulation and encourage free-market competition. It introduced other significant changes to the structure of the financial markets. These include the elimination of minimum fixed commissions on trades and the removal of the separation between companies that traded stocks and those that advised investors.

These changes increased competition among brokerage companies and led to a series of mergers and acquisitions. Another Big Bang change allowed foreign ownership of U.K. brokers, which opened London's market to international banks.

Navigating the Main Market of the LSE

The Main Market of the London Stock Exchange is one of the world's most diverse stock markets with companies making up 40 different sectors. A listing on the LSE's Main Market gives companies access to real-time pricing; deep pools of capital; benchmarking through the FTSE UK Index Series; and significant levels of media coverage, research, and announcements.

There are a number of different ways for companies to join the Main Market, including the following:

Premium

The Premium segment applies only to equity shares issued by commercial trading companies. Premium listing issuers are required to meet the UK’s super-equivalent rules. These companies may have access to a lower cost of capital and to investors who seek out companies that adhere to the highest standards. A company with a Premium listing also has the possibility of being included in one of the FTSE indices.

Standard

The Standard segment is open to the issuing of equity shares, Global Depositary Receipts (GDRs), debt securities, and derivatives that must comply with minimum requirements. The overall compliance burden is lighter for companies with a Standard listing. A Standard listing helps companies from emerging markets attract investments from London's large pool of available capital.

Specialist

The Specialist Fund Segment is designed specifically for high growth, revenue-generating businesses, and highly specialized investment entities that target institutional investors or professionally advised investors, respectively. This segment is for companies that are not eligible for a Premium or Standard listing but are seeking funding to grow their companies.

The Bottom Line

The London Stock Exchange (LSE) traces back to John Castaing's price lists at Jonathan's Coffee House in 1698 and became a regulated exchange in 1801, later reshaped by the 1986 "Big Bang" move toward electronic trading and global capital.

Today, under the London Stock Exchange Group formed after the 2007 Borsa Italiana merger, it hosts diverse Main Market listings, and the FTSE 100 tracks blue-chip names like AstraZeneca, Shell, HSBC, Unilever, and BP.