Trading at the LSE – London Stock Exchange
The LSE – London Stock Exchange is based in the UK in the City of London. It is the world’s third largest stock exchange with a market capitalisation of around US$6 trillion, and the biggest in Europe. Founded in 1801, the LSE is located in Paternoster Square, near to St Paul’s Cathedral. It is one of the oldest stock exchanges in the world, with a history dating back over 3 centuries. Today, it is part of the London Stock Exchange Group which was formed in 2007 from a merger between the London Stock Exchange and the Borsa Italiana, the Milan Stock Exchange. The London Stock Exchange has 350 different companies that are from over 50 different countries and its dominant index is the famous FTSE (informally known as the Footsie), or the Financial Times Stock Exchange to give it its full title.
A History of the London Stock Exchange
From the end of the 17th century, organised trading began to take place in London’s coffee houses, starting with prices on a few commodities and auctions taking place during the amount of time it took for a candle to burn. By the middle of the 1700s, there were around 150 stock brokers who gathered at a coffee shop with the purpose of buying and selling shares. It was 1801 when the first formal stock exchange, the London Stock Exchange, was established, and formal memberships were available by subscription. As there was a boom in world economies, so the stocks that were offered increased and the number of memberships sold began to rise. Soon, branches of the stock exchange began to open up in some of the cities that were growing centres of business, including Manchester and Liverpool. Through the course of the 20th century, the London Stock Exchange expanded even more in size, despite the occasional slow down in growth due to the two world wars. During 1945, trading was even moved down into the basement of the building when it was hit by a V2 rocket. The exchange was relocated in 1967 to the Stock Exchange Tower, which became its permanent home until 2004. 1984 saw the compilation of the FTSE 100 Index, which was devised to gauge how prosperous the market was. This index compiled the top 100 companies on the exchange, and is still published today. In 1986, the UK stock market was suddenly deregulated in an event which is now referred to as the Big Bang, and minimum commissions were abolished and electronic trading was now permitted. Individual members were also now allowed to vote and ownership was now permitted of member firms by outside corporations. With a huge influx of computer systems that needed to be installed in the wake of this new move, the London Stock Exchange was once more moved to a new premises in Paternoster Square, which was better able to serve its needs.
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Products Available From the LSE – London Stock Exchange
For any company which wishes to list on the London Stock Exchange, there are multiple markets to choose from. The Main Market’s listings are generally reserved for companies that are large and established, whereas the AIM is a market that intends to service small companies that are growing and developing. There is also a Professional Securities Market and a Specialist Fund Market, both of which offer alternative listings.
There are numerous indices on the LSE, including:
- FTSE 100 Index
- FTSE 250 Index
- FTSE 350 Index
- FTSE SmallCap Index
- FTSE All-Share Index
The LSE also has secondary markets which include securities trading through covered warrants, bonds, ETFs, ETPs and more.
The London Stock Exchange’s Electronic Platforms
The LSE has many electronic platforms on which different products can be traded. These include:
- Stock Exchange Electronic Trading Service (SETS) – this is the flagship electronic order book of the LSE which trades indexed securities (including the FTSE 100, FTSE 250 and FTSE SmallCap Index)
- Stock Exchange Electronic Trading Services – quotes and crosses – this is a trading platform used for securities that are less liquid than securities that are traded on SETS
- SEAQ – this is the LSE’s non-electronic quotation service which permits market makers to quote the prices in the Fixed Interest market and AIM securities
- IOB – the International Order Book is a cost efficient and easy way for traders to achieve access to investment in rapidly growing economies, such as those in the Middle East, Asia and Eastern Europe through the use of DRs (depositary receipts)
- European Quoting Service – this service allows clients to meet pre-trade pan European transparency obligations
- A pan European service for trade reporting which allows clients to meet post trade obligations for reporting whether they are trading off or on the Exchange
- Turquoise platform – derivatives products are traded on this platform
- MTS – this fixed income trading electronic platform is used for trading quasi-government bonds, European government bonds, covered bonds, repo and corporate bonds. It gives access to report and cash markets as well as fixed income indices and fixed income market data. MTS is majority owned by the London Stock Exchange Group but shareholding firms include several large international banks including BNP Paribas, JP Morgan and Deutsche Bank
Trading Times of the LSE
The standard trading sessions on the SETS system of the London Stock Exchange are held from 8 am until 4.30 pm local UK time on every week day with the exception of Sundays, Saturdays and any holiday declared in advance by the exchange. The schedule runs as follows:
- Trade reporting from 7.15 am until 7.50 am
- Auction opening from 7.50 am until 8 am
- Continuous trading from 8 am until 4.30 pm
- Auction closing from 4.30 pm until 4.35 pm
- Order maintenance from 4.35 pm until 5 pm
- Trade reporting only from 5 pm until 5.15 pm
Currently, the holidays on which the LSE is not operational, include:
- New Year’s Day
- Good Friday
- Easter Monday
- May Bank Holiday
- Spring Bank Holiday
- Summer Bank Holiday
- Christmas Day
The opening hours for the LSE are quoted in GMT (Greenwich Mean Time) and daylight saving time is observed.
Other educational materials
- New York Stock Exchange (NYSE)
- Paris Stock Exchange – Euronext Paris
- S&P 500
- Composite Index
- Toronto Stock Exchange (TSX)
Recommended further readings
- “Transparency and liquidity: A study of block trades on the London Stock Exchange under different publication rules.” Gemmill, Gordon. The Journal of Finance 51, no. 5 (1996): 1765-1790.
- Calendar effects in the London Stock Exchange FT–SE indices. Mills, T.C. and Andrew Coutts, J., 1995. The European Journal of Finance, 1(1), pp.79-93.