Like many British financial institutions, the London Stock Exchange (LSE) sprang up informally rather than being organised by the government. The exchange’s 300-year history from its roots in City of London coffee houses to a $27bn (£22bn) deal to form a financial data and markets giant have been eventful.
The exchange was formally established in 1773 by a group of stockbrokers who had been trading in the area’s coffee houses. This set-up was in place for more than a century because stockbrokers were deemed too uncouth to be allowed into the Royal Exchange which was established as the City’s centre of commerce in 1571.
At the most prominent of these venues, Jonathan’s Coffee House, John Castaing started publishing a list of prices for stocks and commodities in 1698, establishing the trading of securities in London. In 1801 a group of stock exchange members raised money for the construction of a building in Capel Court in the City and a rule book was introduced a decade later.
The flow of financial information was transformed in 1830 when the electric telegraph began transmitting prices by ticker tape. Company announcements were also pinned up on noticeboards at the LSE.
By the first world war the City was the world’s largest financial centre and the LSE was the biggest exchange. The exchange closed for five months at the start of the war and was restricted when it reopened, prompting almost 1,000 members to leave by 1918. The LSE closed for six days at the start of second world war and was bombed in 1940.
Business boomed in the late 1950s and the LSE began looking for bigger premises. Work began on the 26-floor Stock Exchange Tower in 1967 and the building was opened in 1972.
The following year and on the recommendation of the Monopolies and Mergers Commission – subsequently replaced by the Competition Commission – the LSE allowed women and foreign-born traders on to the trading floor. The LSE also merged with 11 British and Irish regional exchanges.
The 1980s brought arguably the biggest shake-up in the LSE’s history. The Thatcher government ordered a series of changes known as the “Big Bang” that scrapped the distinction between jobbers and brokers and replaced open outcry dealing with screen-based trading. Critics of the measures have argued that retail banks buying up stockbrokers helped lead to the financial crisis.
An IRA bomb destroyed the public viewing areas at Stock Exchange Tower in 1990 and would have caused deaths or injuries without a warning half an hour before the blast. The public viewing area, whose use had dwindled after the end of open outcry, shut in 1992.
The LSE floated in 2001, led by its then chief executive Clara Furse. It was a takeover target throughout the 2000s, rejecting approaches from Nasdaq, Deutsche Börse and Macquarie, an Australian bank. The LSE did its own deals, buying Borsa Italiana in 2007 and taking full control of FTSE International by acquiring Pearson’s stake in 2011.
The European commission blocked the LSE’s attempted friendly merger with Deutsche Börse in 2017. The following year the LSE hit one of the lowest points in its history when its board got caught in a public battle with a shareholder over the ousting of Xavier Rolet as chief executive.
After a six-month search the LSE appointed David Schwimmer, a Goldman Sachs banker, as its chief executive in April 2018. Living up to his dealmaking reputation, Schwimmer has agreed to buy Refinitiv, Thomson Reuters’ former financial information business, turning the LSE into a rival to Michael Bloomberg’s data empire.
