LON Stocks / London Stock Exchange

What is the London Stock Exchange (LON)?

The London Stock Exchange (LSE) is the primary stock exchange in the United Kingdom and the largest in Europe. Originated more than 300 years ago, the regional exchanges were merged in 1973 to form the Stock Exchange of Great Britain and Ireland, later renamed the London Stock Exchange (LSE). The Financial Times Stock Exchange (FTSE) 100 Share Index, or “Footsie”, is the dominant index, containing 100 of the top blue-chip stocks on the LSE.

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

What do you need to know about the London Stock Exchange?

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

What is traded on the LSE?

London Stock Exchange operates a broad range of international equity, ETP and bond markets. Through its platforms, London Stock Exchange offers market participants, including retail investors, institutions and SMEs, access to Europe’s global capital markets.

The London Stock Exchange’s trading services are designed to maximize liquidity for all participating parties and include fully electronic order-driven services for liquid UK securities and international Global Depositary Receipts, and quote-driven market maker services for less liquid securities. With a single connection to the London Stock Exchange, investors have access to securities from more than 100 countries, including developed and emerging markets.

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How does the London Stock Exchange (LSE) work?

London has been one of the world’s leading financial cities for several centuries and is known as a center for international trading, banking and insurance.

History of the LON

Looking at the history of the London Stock Exchange we have to go back to the year 1698. In this year, broker John Castaing chose to quote the prices of commodities and stocks. These activities took place in Jonathan’s Coffee House, at that time a popular meeting place for high level businessmen with the aim to trade. This first indexing was called “The Price of the Stock Exchange and Other Things” by Castaing.

The beginning steps of an English stock exchange had been made. A good 100 years later, it was concluded that a formal system was needed to prevent unscrupulous traders and common fraud. There had to be a regulated stock exchange in London. After several brokers agreed on a set of rules and membership fees, this was the birth of the first regulated stock exchange in the United Kingdom.

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

The LSE is the most international of all exchanges with thousands of companies from over 60 countries, and it is the leading source of equity market liquidity, benchmark prices and market data in Europe. The LSE is connected to international exchanges in Asia and Africa through partnerships and is committed to removing cost and regulatory barriers to capital markets around the world.

Big Bang & the LSE

October 27, 1986, the day the government in the United Kingdom chose to deregulate the LON. This event is also known as the “Big Bang”, an appropriate name because of the enormous changes it resulted in. With the biggest arrowhead, the transition to electronic trading on the London Stock Exchange. This marked a departure from traditional open outcry trading.

With this new system, a more efficient and faster way of trading was established, trading volumes increased immediately and it became a tolerated competitor to other major exchanges around the world including the NYSEA & NYSE.

The Big Bang was part of the government’s reform program aimed at countering overregulation and encouraging more natural competition in the free market. In addition to this transition, other significant changes were made to the structure of financial markets, including:

• Elimination of separation between firms that trade stocks and those that advise investors
• Abolition of fixed minimum commissions on transactions

Competition between different brokers increased tremendously which led in a good number of mergers and acquisitions. Another development that should not be forgotten is the admission of foreign properties of brokers in the UK. This opened up the London Stock Exchange to international banks.

Is the London Stock Exchange regulated?

• Main Market is London Stock Exchange’s Regulated Market, with disclosure rules aligned to Prospectus Regulation. The Financial Conduct Authority (FCA) approves Prospectuses for admission to the Main Market. As a Regulated Market, securities admitted to other Regulated Markets can be passported onto the Main Market. LSEG works closely with the FCA and key advisers on deals to provide an efficient listing process that best suits the needs of issuers.
• International Securities Market (ISM) is LSEG’s Exchange Regulated Market and operates as a Multilateral Trading Facility (MTF) under UK law. ISM operates under its own Rulebook, which provides for tailored Admission and Disclosure requirements.

ISM’s dedicated and knowledgeable Primary Markets Regulation team is responsible for reviewing Admission Particulars and assessing the eligibility of issuers and their securities for admission to ISM.

LSE Listing Requirements

The different divisions all have different listing requirements. AIM has the least-restrictive standards and Main Market Premium is the most demanding in terms of requirements.

Main Market Premium companies can be located anywhere and must file a prospectus and eligibility letter with the Financial Conduct Authority (FCA), the U.K. independent financial regulatory agency and have a listing sponsor. They must have at least 25% free float and 75% of the business must be supported by a revenue of at least three years.

Standard Main Market companies can be located anywhere, must file a prospectus with the FCA and have at least 25% free float.

Main Market High Growth Segment companies have to be in the U.K. or Europe, submit an eligibility letter to the exchange and a prospectus to the FCA, have at least 10% float and have posted at least 20% compound annual growth for three years.

AIM companies can be located anywhere and must submit an admission document and declaration of suitability from a nominated adviser, which is a financial services firm approved by the LSE work with AIM companies