ALEXANDER JUSTHAM: How the LSE went from the 17th century coffee house …

Published:
14:36 GMT, 5 September 2014

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Updated:
15:43 GMT, 5 September 2014

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The London Stock Exchange started out as a collection of coffee houses focused around the City where merchants and brokers arranged deals.

Nowadays it is a globally focused exchange attracting companies wanting to list and those wanting to trade shares.

With the Stock Market Show approaching, Alexander Justham, chief executive of the LSE explains how the exchange has evolved since its opening 300 years ago.

Traders: The London Stock Exchange started as coffee houses where brokers met and is now a global group

Walking through the streets of the City of London 300 years ago, you would have encountered the hubbub of noise and activity coming from the coffee houses, where merchants and brokers would be negotiating deals.

It would have been common to see merchants bartering terms of credit for their next exotic expeditions, who after many months would hope to return with cargoes of sugar and tobacco or gold and furs.

One well-known coffee house was in Change Alley, near the Bank of England. Called Jonathan’s, it was there that the broker John Castaing first took to posting lists of stock and commodity prices every Tuesday and Friday. This is considered the earliest evidence of organised trading in marketable securities in London and the origin of the term, ‘to list.’

LEARN HOW TO BECOME A BETTER AND RICHER INVESTOR

Alexander
Justham will be one of the speaking at the Stock Market Show on 13
September 2014 at the Business Design Centre, Islington, London.

The
event is being run by Shares, sister magazine to our market data
partner MoneyAM, and the London Stock Exchange, with the support of This
is Money.

The
aim is to educate and engage investors, with investing seminars, the
chance to meet leading market experts and senior figures from listed
companies.

You
will also get to meet and discuss ideas with fellow investors and speak
to representatives from listed companies, leading DIY investing
platforms, brokers and fund managers.

The show is free but book your place at www.thestockmarketshow.com and click the ‘Register Now’ tab.

In 1773, a group of brokers decided to erect their own building, briefly known as ‘New Jonathan’s,’ but soon becoming ‘The Stock Exchange.’

In 1801, they would introduce a formal membership subscription system, marking the arrival of the first regulated exchange and the birth of the modern Stock Exchange.

National expansion

Over the course of the 18th and 19th centuries, The Stock Exchange and London’s markets would grow exponentially.

The Exchange moved to larger premises in the City, expanded regionally in cities such as Liverpool and Manchester and numerous waves of speculative stock picking fever swept across the country, as the British Empire continued to expand.

From the late 19th century until the Great War of 1914, a boom era in trading established itself. Then in 1914, the country was plunged in to darkness and from the end of July until the New Year, London Stock Exchange closed its doors, with more than 1,600 members volunteering to go to war.

Called The Stock Exchange Batillion of Royal Fusilliers, 400 men would never return. The Exchange would only close its doors on two more occasions, once in 1939 at the start of World War Two and once more in 1945 due to damage from a V2 rocket.

The aftermath post war was a more edgy and less ebullient market but in time, trading and morale improved, allowing London Stock Exchange to grow once more and require new premises.

The new City landmark, The Stock Exchange Tower, was opened by Queen Elizabeth II on 08 November 1972.

The Big Bang

Margaret Thatcher, the UK’s first female Prime Minister, is another woman who made a lasting impression on the financial markets.

Her momentous decision in 1986 to deregulate the market had a profound impact on London Stock Exchange.

‘True to its core’: Alexander Justham says the LSE supports big and small firms in its early days

The phrase Big Bang was coined to refer to the sudden deregulation, which included trading moving from face-to-face on a market floor to being performed via computer and telephone in offices around the City. In October 1986, the cacophony of shouting traders was finally silenced, marking the end of an era for open-outcry trading.

Deregulation and reform allowed London’s markets to strengthen, letting London grow its international supremacy. Despite this, one hindrance remained to the new fast-paced, post Big Bang world of securities.

It was still a mutual organisation, owned by its members. In 2001, the Board decided London Stock Exchange should demutualise and list on its own Main Market, as London Stock Exchange plc. Not long after in 2007, London Stock Exchange merged with the Italian exchange, Borsa Italiana, creating one of the world’s largest international exchange groups.

Through innovation and acquisition over the years, the company has been transformed into a global business, operating in multiple areas aside from the traditional equity franchise.

Despite this, London Stock Exchange still remains true to its core, facilitating long-term, sustainable growth capital for large international companies through to the UK’s aspiring smaller businesses. The modern day equivalent of the 17th century merchant remains at the heart of London Stock Exchange.