What Is the London Stock Exchange (LSE)?
The London Stock Exchange (LSE) is the primary stock exchange in the United Kingdom and its largest. Originating 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 theLondon Stock Exchange Group.
Key Takeaways
- 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 London Stock Exchange (LSE) rivals the New York Stock Exchange (NYSE) in terms of market capitalization, trade volume, access to capital, and trade liquidity.
- 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.
Understanding the London Stock Exchange (LSE)
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 provideselectronicequities 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 fromcapital markets worldwide.
The LSE and the Big Bang
On Oct. 27, 1986, the U.K. government deregulated the London stock market. Known as the "Big Bang" because of the massive changes that immediately ensued, deregulation introduced electronic trading to the London Stock Exchange, which replaced traditional open outcry trading. 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.
The Main Market
The Main Market of the London Stock Exchangeisone of the world's mostdiverse stock marketswith companies making up40 differentsectors.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 ofmedia coverage, research, and announcements.
There are a number of different ways for companies to jointhe Main Market, including the following:
Premium
The Premium segment applies onlyto 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,andderivatives 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 isdesigned specifically for high growth, revenue-generating businesses, andhighly specialized investment entities thattarget 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.
What Companies Does the London Stock Exchange Group Own?
Apart from the London Stock Exchange (LSE) itself, the LSEG also owns FTSE Russell, Refinitiv, and LCH Clearing.
When Was the London Stock Exchange Established?
The LSE was formed in 1801 as London's first regulated exchange.
What Are the Top Companies on the London Exchange?
The largest companies by market cap listed on the LSE as of June 21, 2023, are:
- AstraZeneca PLC
- Shell PLC
- HSBC Holding PLC
- Unilever PLC
- BP PLC
The Bottom Line
The London Stock Exchange (LSE) is the main stock exchange in the United Kingdom and one of the largest stock exchanges in the world. It has a long history dating back to the 1600s and has evolved over the course of its existence. The exchange lists many of the largest companies in the world, such as Shell, HSBC, and BP.
