Candlestick Trading Blog

---

London Stock Exchange:

The London Stock Exchange lists over 3,000 companies and is the most international of all of the exchanges with 350 of the 3,000 companies coming from 50 different countries.  London is one of the top locations for finance in the world and is the United Kingdom’s primary center for business. The other financial institution based in London, besides the London Stock Exchange, is the London International Financial Futures and Options Exchange. The United Kingdom has low taxes and follows a free market model making it ideal for lots of investors.  In recent times, the different stock exchanges around the globe are combining or buying stakes in each other to meet the needs of their clients. Clients are demanding to trade stock of companies anywhere in the world in order to build a strong portfolio.  They want to do this everywhere in the world and do it faster and cheaper across different asset classes.

The NASDAQ, over the past couple of years has been very strategic in its attempt to take over the London Stock Exchange by bidding on it in April of 2006. The LSE rejected the bid which prompted the NASDAQ to acquire a unit of Ameriprise Financial, which is the LSE’s largest Shareholder.  In addition, the NASDAQ purchased 2.69 million additional shares in an attempt to force the LSE to negotiate. Needless to say, this investing strategy did not work and the NASDAQ announced in August of this year (2007) the abandonment of their plan to take over the London Stock Exchange.

The London Stock Exchange can trace it roots to the 1600’s when two voyages were in need of financing. The trade in shares began when two companies raised money to finance their voyage through the selling of shares to merchants. In return these companies would give these merchants, who were willing to take an investment risk, the right to a portion of any potential profits made, as a result of their voyage.  Trading and investing soon after took place in two coffee shops located near the City’s Change Alley.  One of the coffee shops burnt down in the mid 1700’s which prompted the building of the “Stock Exchange” actual building located on Threadneedle Street.  It is also stated that the original concept of the LSE originated in 1760 when 150 brokers set up a club to buy and sell shares after they were fired from the Royal Exchange for misconduct. Currently the London Stock Exchange resides on Paternoster Square close to St. Paul’s Cathedral as of 2004. 

It was not until 1973 that Women were admitted into the London Stock Exchange. After years of campaigning by women in the financial sector, equality was finally admitted in February of 1973 and ten women were elected as members of the LSE.  Another significant point in time occurred in 1986 when stock trading was first carried out via computer and via telephone rather than face-to-face on the stock market floor. The London Stock Exchange is now of course completely electronic, but shares are traded on different systems.  The SETS system is used to trade highly liquid shares and the SEAQ system is used for securities that trade less regularly.  The SETS system is automated in that an order is automatically executed when a buy and sell stock price match.  The SEAQ system was implemented for market makers that keep the shares liquid to ensure that there is always a market for the stock.

The London Stock Exchange consists of two distinctive stock markets.  The Main Market is one of the stock markets with very strict listing requirements and is only for well established, high performing companies. About 1,800 of the London Stock Exchange’s company listings trade on the Main Market with the total market capitalization over 3,500 billion.  The other stock market on the LSE is the Alternative Investment Market (AIM). It obviously trades mostly new enterprises with potential for growth and trades small cap stocks. There are over 1,000 companies listed on this market with a total capitalization of 37 billion.

The London Stock Exchange is ranked fourth in terms of the market capitalization following behind the New York Stock Exchange (number one), the Tokyo Stock Exchange (second), and the NASDAQ (third), and continues to make its mark in the stock market game.