Question

Explanation of PSX, NYSE, and LSE and their features

Answer 1

I briefly explain all stock exchanges, starting with what is stock exchange is and its history then the Pakistan stock exchange, New-York Stock Exchange and London Stock Exchange, and then their submarkets

·       HISTORY:

 

A stock alternate, securities exchange, or bourse is an exchange wherein stockbrokers and buyers should buy and sell securities. Which includes stocks or inventory, bonds and other economic gadgets. Stock exchanges may offer facilities for the difficulty and redemption of such securities and contraptions and capital activities which include the price of income and dividends. Securities traded on a stock exchange consist of inventory issued by means of indexed businesses, until trust, derivatives, pooled investment merchandise, and bonds. Stock exchanges are often characterized as “continuous auction” markets with shoppers and sellers consummating transactions thru open outcry as a principal region which includes the ground of the exchange or by the way of the usage of a digital buying and selling platform to be capable of alternate protection on a positive inventory trade, the safety needs to be indexed there. Usually, there’s an important area at least for report-maintaining, but trade is increasingly much less linked to a physical region, as contemporary markets use digital conversation networks, which offer the advantage of multiplied speed and decreased cost of transactions. Trade on an exchange is constrained to brokers who are participants of the trade. In latest years, various different buying and selling venues, inclusive of digital verbal exchange networks, opportunity trading systems and darkish pools have taken tons of the buying and selling pastime far away from traditional inventory exchanges. Initial public offerings of shares and bonds to traders are executed in the number one market and next trading is executed within the secondary marketplace. 

·       STOCK EXCHANGE:

A stock exchange is an important factor in the capital market. It is a secure place where trading is done in a systematic way. Here, the securities are brought and sold as per well-structured rules and regulations. Securities mentioned here includes debenture and shared issued by a public company that is correctly listed at the stock exchange, debenture and bonds issued by the government bodies, municipal and public bodies. Typically, bonds are traded Over-the-Counter (OTC), but a few corporate bonds are sold in a stock exchange. It can enforce rules and regulation on the brokers and firms that are enrolled with them.

·       HISTORY:

A stock alternate, securities exchange, or bourse is an exchange wherein stockbrokers and buyers should buy and sell securities. Which includes stocks or inventory, bonds and other economic gadgets. Stock exchanges may offer facilities for the difficulty and redemption of such securities and contraptions and capital activities which include the price of income and dividends. Securities traded on a stock exchange consist of inventory issued by means of indexed businesses, until trust, derivatives, pooled investment merchandise, and bonds. Stock exchanges are often characterized as “continuous auction” markets with shoppers and sellers consummating transactions thru open outcry as a principal region which includes the ground of the exchange or by the way of the usage of a digital buying and selling platform to be capable of alternate protection on a positive inventory trade, the safety needs to be indexed there. Usually, there’s an important area at least for report-maintaining, but trade is increasingly much less linked to a physical region, as contemporary markets use digital conversation networks, which offer the advantage of multiplied speed and decreased cost of transactions. Trade on an exchange is constrained to brokers who are participants of the trade. In latest years, various different buying and selling venues, inclusive of digital verbal exchange networks, opportunity trading systems and darkish pools have taken tons of the buying and selling pastime far away from traditional inventory exchanges. Initial public offerings of shares and bonds to traders are executed in the number one market and next trading is executed within the secondary marketplace.

 

·       FEATURES:

Ø  A market for securities – It is a wholesome market where securities of government, corporate companies, semi-government companies are bought and sold

Ø  Second hand securities – It associates with bonds, shares that have already been announced by the company once previously

Ø  Regulate trade in securities – The exchange does not sell and buy bonds and shares on its own account. The broker or exchange members do the trade on the company’s behalf.

Ø  Dealings only in registered securities – Only listed securities recorded in the exchange office can be traded

Ø  Transaction – Only through authorized brokers and members the transaction for securities can be made

Ø  Recognition – It requires to be recognized by the central government

Ø  Measuring device – It develops and indicates the growth and securities of a business in the index of a stock exchange

Ø  Operation as per rules – All the security dealings at the stock exchange are controlled by exchange rules and regulations and SEBI guideline

 

·       PAKISTAN STOCK EXCHANGE (PSX):

The PSX was established on 11 January 2016 after the merger of the Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. Before the merger of stock exchanges, the Karachi Stock Exchange held a three-day trading session of all the certificates holders.  The integration of these three stock exchanges was intended to reduce market fragmentation and have a strong base for investors and business partnerships. In 2018, there were 559 companies listed In Pakistan Stock Exchange. The total market capitalization is $84 billion. In 2017, the Pakistan Stock Exchange was considered as an emerging market The Chairperson of Pakistan Stock Exchange is Sulaiman Mehdi while the CEO is Rafiq Umar. In October 1970, under the Securities and Exchange Ordinance of 1969 by the Government of Pakistan, a second stock exchange was established in Lahore in response to the needs of the provincial metropolis of the province of Punjab. It initially had 83 members and was housed in a rented building in the crowded Bank Square area of Lahore. The LSE was the first stock exchange in Pakistan to use the internet. Yet another stock exchange known as Islamabad Stock Exchange was established in Islamabad, the capital city of Pakistan on October 25, 1989 with the main object of setting up of a trading and settlement infrastructure, information system, skilled resources, accessibility and a fair and orderly market place that ranks with the best in the world and to cater to the needs of less developed areas of the northern part of Pakistan. It was licensed as a stock exchange on January 7, 1992. All these three exchanges had separate management, trading interfaces, indexes, listing criteria etc and thus had no mutual links to each other. All three exchanges were previously operating as a non-profit organization with mutualized structure wherein there respective members had trading as well as ownership rights. This structure inherently created conflict of interest and perceived to jeopardize the investors' interest. Therefore, the Stock Exchanges (Corporatization, Demutualization & Integration) Act, 2012 (known as "Demutualization Act") was promulgated by the Government. As a result these three exchanges were merged together to form a new combined exchange called Pakistan Stock Exchange Limited (PSX) which started its operations on January 11, 2016 under this new title. As provided under the aforesaid Demutualization Act, now Members have ceased to be Members of PSX and they have been issued Trading Right Entitlement Certificates ("TRECs") and PSX's ownership shares, thus separating trading rights from ownership rights. Whereas TRECs represent trading rights, PSX shares represent ownership. Now, TREC holders need not be a shareholder of PSX nor a PSX shareholder is required to be TREC holder of PSX. As envisaged under the provisions of the Demutualization Act, regulatory functions have been segregated from commercial functions of PSX, so that regulatory functions are not compromised for achievement of commercial objective of generating revenue. Moreover, under the provisions of the said Act, after demutualization, persons representing TREC holders on the PSX Board shall not be in majority and the Act also envisages divestment of shares of TREC holders held in their blocked accounts to strategic investors and general public/financial institutions within a certain time limit. Karachi branch of Pakistan Stock Exchange is located on Stock Exchange Road, in the heart of business district of Karachi. The premises is known as Stock Exchange Building.

 

 

 

 

 

·       LISTING IN PSX:

As on April 18th, 2022 there are 553 companies listed in PSX and the total market capitalization is Rs. 7,759.736 billion. The listing is done on the basis of strict rules and regulations laid out by Securities Exchange Commission of Pakistan (SECP) & the management of Pakistan Stock Exchange Limited. All the listed companies are categorized in various main business sectors. As on April 18th, 2022 there are total 36 sectors listed on Pakistan Stock Exchange which contribute towards the market capitalization and all the listed companies (excluding their future contracts) are divided among these. Rest of the noncontributory sectors are allocated for indexes, futures, bonds etc. 

·       KARACHI STOCK EXCHANGE:

The Karachi Stock Exchange (KSE), established in 1947, is the oldest and the most active of the three stock exchanges in Pakistan, and currently lists 662 companies with a total market capitalization of about $52. billion. The KSE100 represents major blue chips companies and is fairly representative of the market. Besides the KSE there are two regional stock exchanges in Lahore and Islamabad. The other two exchanges are however relatively inactive. For example, during July 2005-March 2006 the average daily turnover at the KSE was 462.4 million shares, while at the LSE and ISE it was 65.4 and 1.7 million shares, representing 12% and 3% of the total market activity respectively. Similar to other emerging markets, the KSE has a limited role in raising new capital; e.g., there were only five new listings in the market in 2005. Despite the small size of the market, it experiences a high turnover and high price volatility. From the plot of the KSE100 index over the five-year period 2001-2005 (See Figure 1), one can see that the market experienced significant fluctuations over shorter time intervals. Finally, a skewed size distribution of stocks traded is observed for the KSE i.e., skewed in terms of size, trading patterns, volume of brokers’ trading and weighted value of stocks in the index. This is particularly true for the top 20 stocks accounting for 85% of the overall turnover. Exhibit A shows the salient features of the BSE and KSE for comparison. The KSE is a much smaller market compared to the BSE, both in terms of listed companies as well as market capitalization. The KSE represents only 0.7% of the total capitalization of emerging markets, compared to the BSE’s 7.9% share. It is interesting to note the sharp contrast between Pakistan’s capitalization ratio (which is low) and relatively high turnover ratio. This characteristic probably reflects noise trading and speculative elements in the market. The spectacular rise in the S&P/IFC Global Index of 410% over the 2001-05 period is remarkable, though the BSE’s 260% appreciation also stands in sharp contrast with the performance elsewhere in the world. The appreciation in the KSE100 index and BSE30 index was 534% and 137% respectively for the same period.

Karachi Stock Exchange has

Ø  652 companies listed

Ø  With a total market capitalization of $53.3 billion

Ø  36 Sectors are listed

Ø  The exchange is owned by 200 members

Ø  KSE contains 4 indexes today (KSE all share index, KSE 100 Index, KSE 30 Index and KMI 30 Index)

Ø  1850 trading terminals exist in KSE today

Ø  Trade done through electronic trading system

 

·       KSE 100 INDEX:

The KSE-100 Index was introduced in November 1991 with base value of 1,000 points. The Index comprises of 100 companies selected on the basis of sector representation and highest free-float capitalization, which captures over 80% of the total free-float capitalization of the companies listed on the Exchange. 36 companies are selected i.e. one company from each sector on the basis of the largest free-float capitalization and the remaining 64 companies are selected on the basis of largest free-float capitalization in descending order. This is a total return index i.e. dividend, bonus and rights are adjusted.

·       FREE FLOAT:

Free-Float is the proportion of total paid-up shares issued by a company that are readily available for trading at a Stock Exchange. It implies that the shares held by controlling directors, sponsors, promoters, government and other locked-in shares which are not available for trading in the normal course are excluded.

 

 

 

·       KSE ALL INDEX:

In 1995, the need was felt for an all-share index to reconfirm the KSE-100 and also to provide the basis of index trading in future. By August 29, 1995 the KSE-All Share Index was constructed which became operative on September 18, 1995.

·       KSE 30 INDEX:

In June 2005, another benchmark index named KSE-30 was introduced with a base value of 10,000 index points to provide investors with a sense of how large companies' scrips of the Pakistan’s equity market are performing over a period of time. Thus, the KSE-30 Index is designed in such a way that it becomes comparable over a period of time similar to other indicators that track various sectors of country’s economic activity such as the gross national product, consumer price index etc.

·       KMI 30 INDEX:

Introduced in September 2008, the objective of KSE-Meezan Index (KMI) is to serve as a gauge for measuring the performance of Shariah compliant equity investments. Besides tracking performance of Shariah compliant equities, its construction will increase investor trust and enhance their participation.

 

·       LAHORE STOCK EXCHANGE:

The Lahore Stock Exchange was established in October 1970, under the Securities and Exchange Ordinance, 1969 by the Government of Pakistan in response to the needs for the provincial capital of Punjab. It initially had 83 companies listed and was headquartered at Bank Square in Lahore. The number of listed companies increased to 519 since its inception. The LSE has a total capital of ₨555.67 billion (US$3.5 billion) with a market capitalization of ₨2.51 trillion (US$16 billion). The Lahore Stock Exchange opened branches in the industrial cities of Faisalabad and Sialkot for trading. The Sialkot branch is referred to as the Sialkot Trading Floor. With effect from 11 January 2016, the Lahore Stock Exchange was integrated with the Karachi Stock Exchange and Islamabad Stock Exchange under the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012 to form the Pakistan Stock Exchange.

 

 

 

 

·       LSE-25:

LSE-25: The Lahore Stock Exchange Twenty Five company index calculates the performance of stocks assuming that all rights issues and bonus share issues only increase the listed capital so that the prices of the shares are not adjusted as they are in the case of the LSETRI. The LSE25 also assumes that dividends paid out by a component company are not reinvested. In summary, in the LSE25, no price adjustments are made when any component company issues cash dividends.

·       LSETRI:

The Lahore Stock Exchange Total Return Index calculates the performance of stocks assuming that all payouts are reinvested in the index on the ex-date. The LSETRI assumes that if a component company issues bonus shares or announces a right issue it will increase the listed capital. Additionally, the LSETRI also assumes that all pay-outs by a component company are 100% reinvested in the index. Therefore, the LSETRI is adjusted against such payouts announced by any of index constituents on its ex-date allowing the index value to remain comparable over time.

·       ISLAMABAD STOCK EXCHANGE:

Islamabad Stock Exchange (ISE) turned into incorporated as an assure-limited business enterprise on 25 October 1989 in Islamabad capital territory with the principle item of setting up a buying and selling and settlement infrastructure, information device, skilled assets, accessibility, and an honest and orderly marketplace that ranks with the nice within the world. It changed into licensed as a stock trade on 7 January 1992. It started out trading in July 1992. ISE has been corporatized and demutualized on August 26, 2015, in phrases of the Stock Exchanges (Corporatization, Demutualization, and Integration) Act, 2012. As a consequence, thereof, its name has been changed to Islamabad Stock Exchange Limited. With impact from January 11, 2016, the Islamabad Stock Exchange was incorporated with the Karachi Stock Exchange Limited under the Stock Exchanges (Corporatization, Demutualization, and Integration) Act, 2012 to shape the Pakistan Stock Exchange Limited.

 

 

 

·       TRADING SYSTEM:

Initially, an outcry technique of trading (a way of trading that uses verbal bids and gives in the buying and selling pits) in shares become adopted which turned replaced with the automatic trading gadget (a computerized machine for matching orders in securities) typically known as “ISE-CTS” in 1997. In the year 2002, INSECTS gave manner to the “ULTRA TRADE” trading system which isn't always only very efficient but additionally has extended trading capability, and internet buying and selling functionality. The automatic buying and selling gadget has delivered good deal-wanted transparency in securities buying and selling. It has been designed in this kind of manner to offer automatic matching of bids and gives for execution purposes. All orders are dealt with in strict rate and time precedence, consequently ensuring a natural public sale marketplace in which no order is neglected or traded through. In this way, the fine change is completed and handed on to the members without human interference. Printed confirmation and standing messages are at once obtained by means of a member for each of his orders. Remote Trading or Internet Trading has been carried out in ISE on 23 June 2003. Now Brokers can exchange from anywhere inside the international the usage of the far-flung buying and selling software program of ISE with the same robustness as working at the LAN.

·       UNIFIED TRADING SYSTEM:

Islamabad Stock Exchange joined arms with Lahore Stock Exchange on 30 April 2007 to establish a Unified Trading Platform to assist in bringing accelerated liquidity inside the marketplace, improving charge discovery, maximizing transparency, increasing turnover, broadening investor base, curbing dangers and distortions in change, offering price effective carrier to the investing public and improving the picture of each the Exchanges.

·       INDEXES:

On 1 January 2004, ISE launched its personal capital weighted index that is the ISE-10 index with a base date of Dec 31, 2002, and a price of one thousand. Before its launch, ISE became the usage of the index of KSE-a hundred. ISE additionally has a fee-weighted index known as ISE Network Index which become released in November 1996.

 

 

 

·       ISE TOWERS:

ISE meant to assemble a high-upward thrust structure which will deal with the upcoming needs of the inventory exchange enterprise. For this reason, ISE builds new homes which can be properly designed the usage of the ultra-modern techniques to resist any natural screw ups just like the 2005 Kashmir earthquake that result in the disintegrate of the excessive-upward push Margalla Towers in Islamabad. ISE tower is a 22-story building, which makes it the second one-highest constructing in Islamabad after the Telecom Tower. The region included by using the building is 562,629 square ft (52,269. Nine m2), it includes three tiers of basements and floor plus 18 flooring above. Basements have the ability to house 3 hundred automobiles at a time. The building also incorporates a plant room for the present-day HVAC device requirements. The floor is allocated for meeting the necessities of banks. Each floor is covered via 6 passenger lifts and one cargo elevate alongside 3 stairwells. A significant cooling and heating machine is supplied inside the building. The building is also geared up with the present-day communique and electric structures. For a safe running environment, a well-designed hearth fighting gadget is furnished along with the emergency hearth existence. It is also the primary building in Islamabad to have an LCD screen connected to it. ISE Towers had been designed via NESPAK Pvt. Ltd. And the contractors have been Habib Rafiq Pvt. Ltd. The production started out in early 2006 and the Towers had been finished in April 2009. It changed into inaugurated by Prime Minister Syed Yousuf Raza Gilani on 31 July 2009.

·       FEATURES OF PAKISTAN STOCK EXCHANGE:

Ø  Pakistan’s stock market is smaller in size but is significantly more active than the markets of this size

Ø  In recent years the market has provided very high returns to investors

Ø  In 2002 the market was declared as the best performing stock market globally

 

 

 

 

 

 

·       NEW-YORK STOCK EXCHANGE (NYSE):

The New York Stock Exchange (NYSE), positioned in New York City, is the oldest American alternate still in lifestyles and the most important equities-primarily based alternate within the world based on the total marketplace capitalization of its listed securities. The NYSE turned into based on May 17, 1792, whilst 24 stockbrokers amassed at 68 Wall St. To create what later has become known as the Buttonwood Agreement, after the tree below which the % turned into signed. In the beginning, there had been just 5 securities. The first business enterprise to listing on the NYSE was the Bank of New York.14 For greater than two hundred years, the NYSE operated as a member-owned nonprofit business enterprise. It went public beneath the symbol NYX on March 8, 2006, following its merger with Archipelago Holdings. Nine In 2007, the NYSE merged with Euronext, the largest stock alternate in Europe, to form NYSE Euronext.15 This organization was received in 2013 via Intercontinental Exchange Inc. (ICE), the contemporary discerns employer of the NYSE. Though the NYSE and the Nasdaq are the biggest equities markets in the world, these exchanges are by no means the same. While their differences may not affect your stock picks, your understanding of how these exchanges work will give you some insight into how trades are executed and how a market works. The invention of the the the the the electric telegraph consolidated markets and New York's market rose to dominance over Philadelphia after weathering a few market panics better than other options. The Open Board of Stock Brokers changed hooked up in 1864 as a competitor to the NYSE. With 354 contributors, the Open Board of Stock Brokers rivaled the NYSE in membership (which had 533) "because it used an extra present day, continuous trading system advanced to the NYSE’s two times-each day call sessions". The Open Board of Stock Brokers merged with the NYSE in 1869. Robert Wright of Bloomberg writes that the merger accelerated the NYSE's contributors in addition to buying and selling volume, as "numerous dozen local exchanges had been additionally competing with the NYSE for customers. Buyers, sellers, and dealers all wanted to finish transactions as quickly and cost-effectively as technologically feasible, and that was supposed to locate the markets with the maximum trading, or the greatest liquidity in these days’ parlance. Minimizing opposition turned into essential to keep a huge quantity of orders flowing, and the merger helped the NYSE keep its reputation for presenting advanced liquidity." The Civil War substantially stimulated speculative securities trading in New York. By 1869, the club needed to be capped and has been sporadically accelerated because. The latter half of the nineteenth century saw fast growth in securities buying and selling. Securities change inside the latter nineteenth and early 20th centuries and become susceptible to panics and crashes. Government regulation of securities trading was subsequently seen as essential, with arguably the most dramatic changes happening inside the Thirties after a primary inventory marketplace crash precipitated the Great Depression. The NYSE has also imposed extra rules in response to shareholder protection controls, e.g. In 2012, the NYSE imposed regulations restricting brokers from vote casting uninstructed shares.

·       ELECTRONIC:

As of January 24, 2007, all NYSE shares may be traded via its electronic hybrid marketplace (except for a small organization of very pricey shares). Customers can now ship orders for fast electronic execution, or path orders to the floor for change inside the public sale marketplace. In the first three months of 2007, in excess of eighty-two% of all order quantity changed into delivered to the floor electronically. NYSE works with US regulators which include the SEC and CFTC to coordinate hazard control measures in the electronic buying and selling surroundings via the implementation of mechanisms like circuit breakers and liquidity replenishment points. Until 2005, the proper to at once alternate shares at the change became conferred upon owners of the 1,366 "seats". The time period comes from the truth that up until the 1870s NYSE members sat in chairs to alternate. In 1868, the range of seats was constant at 533, and this quantity expanded several instances over the years. In 1953, the number of seats turned set at 1,366. These seats have been a sought-after commodity as they conferred the capacity to immediately alternate stock at the NYSE, and seat holders were usually called contributors to the NYSE. The Barnes own family is the simplest recognized lineage to have five generations of NYSE participants: Winthrop H. Barnes (admitted 1894), Richard W.P. Barnes (admitted 1926), Richard S. Barnes (admitted 1951), Robert H. Barnes (admitted 1972), Derek J. Barnes (admitted 2003). Seat expenses vary broadly over the years, typically falling at some stage in recessions and rising all through economic expansions. The maximum price inflation-adjusted seat become bought in 1929 for $625,000, which, today, could be over six million greenbacks. In the latest times, seats have been offered for as excessive as $four million inside the late Nineteen Nineties and as low as $1 million in 2001. In 2005, seat charges shot up to $three.25 million as the exchange entered into an agreement to merge with Archipelago and have become a for-profit, publicly-traded corporation. Seat owners obtained $500,000 in coins according to seats and 77,000 shares of the newly formed employer. The NYSE now sells one-12 months licenses to trade at once on the trade. Licenses for ground trading are to be had for $forty,000 and a license for bond-buying and selling is to be had for as little as $1,000 as of 2010.  Neither are resell able however may be transferable throughout an exchange of possession of a company retaining a buying and selling license. The trading floor of the New York Stock Exchange in March 2022. Following the Black Monday market crash in 1987, NYSE imposed trading curbs to lessen marketplace volatility and massive panic sell-offs. Following the 2011 rule change, at the beginning of every buying and selling day, the NYSE sets three circuit breaker levels at levels of seven% (Level 1), thirteen% (Level 2), and 20% (Level 3) of the average remaining fee of the S&P 500 for the previous trading day. Level 1 and Level 2 declines bring about a fifteen-minute trading halt until they arise after 3:25 pm when no buying and selling halts practice. A Level 3 decline effects in trading being suspended for the remainder of the day.  (The biggest one-day decline in the S&P 500 when you consider that 1987 was the 11. Ninety-eight% drop on March sixteen, 2020.

·       NYSE COMPOSITE INDEX:

In the mid-1960s, the NYSE Composite Index (NYSE: NYA) became created, with a base cost of 50 points equal to the 1965 yearly close. This was performed to reflect the cost of all stocks trading at the alternate as opposed to just the 30 shares included within the Dow Jones Industrial Average. To boost the profile of the composite index, in 2003, the NYSE set its new base price of 5,000 points same as 2002 every year close. Its near at the give up of 2013 became 10,400.32.

·       FEATURES:

Ø  It affords a critical market for traders to shop for and promote inventory

Ø  It allows organizations to list their stocks and raise capital from involved inventors

The NYSE affords a location in which its participants can alternate inventory in listed groups. Historically, traders are known for their purchase or promote orders to every different on the alternate buying and selling floor. When a purchaser and a dealer agreed on a price, an alternate might arise. Transactions would then be reported on the trade, presenting transparency and allowing green market operations.

Most traders are not participants of the NYSE, but many of the brokerage businesses that allow them to invest in stocks are. When a brokerage purchaser location a trade for an NYSE-listed stock, the brokerage agency relays the orders to its NYSE buying and selling operations, which then manage to execute the alternate and follow the consumer’s commands.

 

 

·       LONDON STOCK EXCHANGE (LSE):

London Stock Exchange is the world’s most international exchange. Nearly 2,500 companies from more than 90 countries are quoted across its markets, with a combined value of £4.4 trillion. London Stock Exchange’s markets include the Main Market – London’s flagship venue for equity, debt and exchange traded products, offering businesses access to Europe’s most liquid pool of capital – and AIM – the world’s leading market for small and growing companies. Since its launch in 1995 AIM has helped 3,500 companies raise £87 billion. 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 stock 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 become clear that a formal system was needed to deter fraud and unscrupulous traders. Brokers agreed to 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 provides electronic equities trading for listed companies. The LSE is the most international of all stock exchange 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 from the capital markets worldwide.

·       THE LIST 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 Exchange is one of the world's most diverse stock markets with companies making up 40 different sectors. 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 of media coverage, research, and announcements.

There are a number of different ways for companies to join the Main Market, including the following:

·       PREMIUM:

The Premium segment applies only to equity shares issued by commercial trading companies. Premium listing issuers are required to meet the UK’s super-equivalent rules, which are higher than the minimum requirements of the European Union (EU). Because of these higher standards, Premium-listed 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.

 

·       STANDARDS:

The Standard segment is open to the issuing of equity shares, Global Depositary Receipts (GDRs), debt securities, and derivatives that must comply with EU 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.

 

 

·       OTHER SEGMENTS:

The High Growth Segment and the Specialist Fund Segment are designed specifically for high growth, revenue-generating businesses, and highly specialized investment entities that target institutional investors or professionally advised investors, respectively. The High Growth Segment is for companies that are not eligible for a Premium or Standard listing but are seeking funding to grow their companies.

 

·       FEATURES:

Ø  The London Stock Exchange Main Market is one of the most highly respected listing exchanges in the world

Ø  The London Stock Exchange has the highest cumulative Market capitalization of all European regulated stock exchanges, including the Frankfurt and NYSE Euronext

Ø  All shares are free trading. There are no restricted shares, even for officers and insides

Ø  Must have a 25% public float

Ø  Simpler reporting requirements

Ø  More liquidity / trading volume than all the exchanges in the world

Ø  A listing on the London Stock Exchange is extremely fast, typically only about 5 months

Ø  The London Stock Exchange is one of the most international only accepted exchange in the world

Ø  The London Stock Exchange receives massive exposure to investors capital

Ø  London Stock Exchange provides cost-efficient access to some of the world’s deepest and most liquid pools of Capital

Ø  It is home to a wide range of companies and provides electronic equities trading for listed company