Summary: The London Stock Exchange is one of the three major (ranked by monetary value) exchanges on earth. The LSE also has the distinction of being the oldest in the world. "The City" has a major impact on the movement of many other markets around the world and in the modern globalised economy, it's reach is far and deep. Therefore, this section will look at some of the things that an investor in London might need to know.
The rules, regulations and workings are complex in places which is why we are here to guide you through. Much of that in depth information can be found on the pages indexed to the left of this text. For this page, we'll cover more general information.
The London Stock
Exchange can chart it's history back over 300 years to the early 17th
century coffee houses of London. These days, it is home to some of the
world's biggest and best companies which enables it to play a dominant
role in international finance.
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These days, the physical presence of 'The City' can be found in two locations. The first, is in the area around Throgmorton Street, known as 'Bank'. The offices of the Bank of England are in the area as well. The second, is in an area known as Canary Wharf, famous for it's skyscrapers. The area covered has grown in recent decades, but for many years, most of the financial services sector was based in the "Square Mile".
The London Stock Exchange actually operates in a number of related areas. These are:
The LSE enables companies from around the world to raise the capital they need to grow, by listing securities on it's efficient, transparent and well-regulated markets. Through our two primary markets – the Main Market and AIM – companies can gain access to one of the world’s deepest and most liquid pools of investment capital.
Another unique feature of the LSE is the existence of the investment trust market. Investment trusts are closed eded collective investments - or to you and me, companies established to invest large sums of money. Some of the oldest trusts were formed over 100 years ago.
The main equity index in London is the FTSE 100. The letters "FT" represent sponsorship by the Financial Times, in much the same way as "Dow Jones" is used on the NYSE.
LSE offers the trading platforms used by broking firms around the world to buy and sell securities. The systems provide fast and efficient access to trading, allowing investors and institutions to tap quickly into equity, bond and derivative markets. Internationally recognised standards of regulation and market practice make the London markets some of the most attractive and liquid in the world. More than 300 firms worldwide trade as members of the London Stock Exchange.
LSE supplies high-quality, real-time prices, news and other information to the global financial community. Strong relationships with data vendors help ensure the markets receive the information they depend upon.
The two main sources of financial reporting in the UK are the Financial Times and the BBC. There are, of course, many other sources, but it is these two that have the most impact. As with other major markets, companies such as Bloomberg and Reuters are also represented.
The LSE has a derivatives business which is a diversification beyond traditional core equity markets. EDX London is the international equity derivatives exchange. The UK covered warrants market is one of the world's fastest growing investment markets.
Many of these markets were enabled by the 'Big Bang', a set of reforms introduced on 27th October 1986 that transformed the working rules and practices of the stock exchange.
As with many other major stock markets, there is more than just equities in London. Both government and corporations have access to a very active bond market for long-term borrowing. In the UK, government bonds are known as gilts (the phrase in English is that something that is guaranteed or very valuable is gilt edged).
The Benefits of London
London has a number of advantages as a financial centre provided by history and good fortune. Firstly and rather obviously, it is an English speaking centre. Since English happens to be the language of many businesses and finance around the world, this makes it a preferred location to other European centres such as Milan, Paris, Zurich and Frankfurt.
Secondly, it is conveniently located in the centre of the time zones (Greenwich, as in GMT, is actually very close to Canary Wharf). The markets open in London as the trading day in Tokyo is ending, and it closes a couple of hours before the opening bell in New York.
England is also home to the world's oldest insurance market. Lloyds of London is the location of a very large percentage of all the reinsurance undertaken globally. The underwriting is carried out by small groups - known as syndicates - of which there are many, as well as underwriters and agents all housed in the same landmark building.
It should also be
noted that the historical links around the world of the British
Commonwealth mean that there are many democratic and legal systems that
are based on the British Parliament and English Common Law. Such trust
and familiarity are difficult for other locations to overtake. Most of the regulation of financial services in the UK is conducted by the Financial Services Authority (FSA).
There are also a number of tax havens with very strong links to the United Kingdom and London. Financial powerhouses such as Jersey and Guernsey, the Isle of Man, Gibraltar and the Cayman Islands all have such ties.
Since the fall of the Soviet Union, London has become a location of
choice for Russian oligarchs which has lead to a number of Russian firms
choosing the LSE for a listing. London has also been something of a vacation city of choice for oil sheiks from the Middle East. The combination of these factors has provided something of an advantage over the long-term for The City.
This combination of factors makes London and the London Stock Exchange major players in global finance and so it's workings will receive a lot of attention on this site. Click here to visit the LSE website: London Stock Exchange.
Needless to say, the LSE is denominated in GBP (pounds, sterling). This means that if an investment is made from abroad, the impact of foreign exchange rates and currency risk need to be considered.
To visit other areas of this site that relate to the LSE, please click on the relevant link:
London Stock Exchange Information
London Stock Exchange History
London Stock Exchange Alternative Investment Market (AIM)
London Stock Exchange Liquidity
London Stock Exchange Stockbrokers
London Stock Exchange Stockbroker Charges
London Stock Exchange SETS
London Stock Exchange Listing Rules