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London Stock Exchange (LSE) Definition

What is the London Stock Exchange (LSE)?

The London Stock Exchange (LSE) is the UK’s main and largest stock exchange. Established over 300 years ago, the regional stock exchanges merged in 1973 to form the Stock Exchange of Great Britain and Ireland, later renamed the London Stock Exchange (LSE). The Financial Times Scholarship (FTSE) 100 Share Index, or “Footsie”, is the dominant index, containing 100 of the LSE’s top blue chip stocks.

The exchange is physically located in the City of London. In 2007, the London Stock Exchange merged with the Milan Stock Exchangethe Borsa Italiana, to form the London Stock Exchange Group.

Key points to remember

  • The London Stock Exchange (LSE) is one of the oldest stock exchanges in the world, the largest in Europe and the main stock exchange in the United Kingdom.
  • The London Stock Exchange (LSE) rivals the New York Stock Exchange (NYSE) in terms of market capitalization, trading volume, access to capital and trading liquidity.
  • The “Big Bang” refers to the deregulation of the London stock market by the government on October 27, 1986, an event which led to a modernized electronic trading system and opened the LSE to capital markets around the world.

Understanding the London Stock Exchange (LSE)

London has long been one of the main financial cities of the world, well known as a hub for international trade, banking and insurance. The history of the London Stock Exchange (LSE) dates back to 1698 when broker John Castaing began posting stock and commodity prices at Jonathan’s Coffee House, which was a popular meeting place for businessmen to carry out transactions. Castaing called his price list “The course of 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, paving the way for the first regulated market. Sotck exchange in London.

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

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

The LSE and the Big Bang

On October 27, 1986, the British government deregulated the London stock market. Known as the “big Bang“Due to the massive changes that immediately followed, deregulation introduced electronic trading to the London Stock Exchange, which replaced traditional exchanges. outcry trade. The new system was efficient and faster, allowing trading volumes to increase and enabling the LSE to successfully compete with other global exchanges, such as the New York Stock Exchange (NYSE).

The Big Bang was part of the government’s reform program to eliminate excessive regulation and encourage free market competition. It introduced other important changes in the structure of financial markets. These include the elimination of minimum fixed commissions on transactions and the removal of the separation between companies that traded shares and those that advised investors.

These changes increased competition between brokerage firms and led to a series of Mergers and Acquisitions. Another change from the Big Bang allowed foreign ownership of UK brokers, which opened up the London market to international banks.

The main market

The main market of the London Stock Exchange is one of the most diverse stock markets in the world with companies representing 40 different sectors. A listing on the main LSE market gives companies access to real-time prices; deep pools of capital; comparative analysis through the FTSE UK index series; and significant levels of media coverage, research and announcements.

There are several ways for businesses to join the main marketplace, including the following:

Prime

The Premium segment only applies to shares issued by trading companies. Listed issuers are required to comply with UK super-equivalent rules, which are above the minimum requirements of the European Union (EU). Because of these higher standards, publicly traded companies may have access to a lower cost of capital and investors who seek companies that adhere to the highest standards. A business with a Premium listing also has the option of being included in one of the FTSE indices.

Standard

The Standard segment is open to the issuance of capital shares, Global certificates of deposit (GDR), debt securities, and derivatives which must meet minimum EU requirements. The overall compliance burden is lighter for companies with a standard list. A Standard listing helps emerging market companies attract investment from London’s vast pool of capital.

Other Segments

The High Growth Segment and the Specialty Funds Segment are designed specifically for high-growth, income-generating businesses and highly specialized investment entities that target institutional investors or professionally advised investors, respectively. The high-growth segment is for businesses that don’t qualify for a Premium or Standard listing but are looking for funding to grow their business.

What companies does the London Stock Exchange Group own?

Advised by the London Stock Exchange (LSE) itself, LSEG also owns FTSE Russell International, Refinitiv, Tradeweb and LCH Clearing.

When was the London Stock Exchange created?

The LSE was established in 1801 as London’s first regulated stock exchange.

What are the top companies on the London Stock Exchange?

The largest UK companies listed on the LSE in Q2 2022 are:

  1. Shell
  2. Astra Zeneca
  3. HSBC
  4. Diageo
  5. Unilever

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