London Stock Market

London stock market, which was founded in 1801 and is located in the City of London - UK, is one of the largest world stock exchanges and the largest in Europe.

The London stock market (London Stock Exchange or LSE shortly) is one of the most important exchanges in Europe and is also one of the largest in the world. It boasts of more 2697 listings of companies out of which 350 of the companies are from fifty different countries. It is located in Paternoster Square, London. As of August 2010 the London Stock Exchange has recorded a market capitalization of 2.63 trillion US dollars.

This stock exchange consists of two markets: the Main Market and the AIM (Alternative Investment Market). The former is meant for established companies and hence its listing requirements are very strict. It is meant for companies with high performance. There is a total market capitalization of $3500 billion in the Main Market, which has more than 1800 of the company listings on London stock market. The AIM on the other hand is for the companies that have high growth potential. These are usually new enterprises and it has a market capitalization of $37 billion.

Trading Hours

The normal trading hours of London stock market are from 8 am to 4.30 pm (GMT) Monday to Friday. Trading is not allowed on weekends and on holidays that are declared in advance. Currently the list of holidays of this stock market includes New Year's Day, May Bank Holiday, Easter, Spring Bank Holiday, Christmas and Summer Bank Holiday.

The trade reporting starts from 7.15am in the morning and continues till 7.50am. This process is followed by opening auction which takes place from 7.50am till 8 am. Continuous Trading is maintained from 8am till 4.20pm and after that there's VWAP from 4.20pm till 4.30 pm. The closing auction starts from 4.30 and stretches till 4.35pm. The order maintenance process is carried out from 4.35pm till 5pm. This is followed by another trade reporting process for 15 minutes. All this process is carried out as per the UK time which is GMT and the daylight saving time is observed.

Trading Segments

The London stock market is a trading market for a lot of securities like UK equities, international equities, debts, covered warrants, ETFs, ETCs, CFDs, depositary receipts, stocks and shares. It is a completely electronic market. The shares to be traded are segregated and sent to two different systems:

  • SETS automated system - This system is used to trade highly liquid shares on an order driven basis, meaning the order is automatically executed when the buying price and the selling price match.
  • SEAQ system - This system is used by the London stock market for securities that are not traded so often. In the system the market makers are suppose to keep their shares liquid and hold them so that there's always a market for such stocks.

Main Stock Indices

The main stock indices of London stock market are:

  • FTSE 100 Index - This is a share index consisting of 100 of the most highly capitalized companies in the UK that is listed on the stock exchange. It is also known as FTSE 100 or simply FTSE.
  • FTSE 250 Index - This is a capitalization weighted index which consists of the largest companies from 101st to 350th ranks in the London stock exchange. This index is published every minute and is calculated in real time. Every year, promotions to the index as well as demotions from the index take place in the months of March, June, September and December.
  • FTSE 350 Index - This is a weighted market capitalization index that is an incorporation of the FTSE 100 and FTSE 250 index. It lists the 350 largest companies in terms of capitalization that are listed on the London stock market.
  • FTSE SmallCap Index - This index consists of companies that have small market capitalization. It consists of the companies that rank from 351st to 621st in the list of companies in the stock exchange.
  • FTSE All-Share Index - This is another capitalization-weighted index that consists of 600 of the companies traded on the stock exchange. It is the aggregation of the previous three stock indices - FTSE 100, FTSE 250 and the SmallCap Index.

Exchange History

The London stock market or London Stock exchange was founded in 1773 by a number of stockbrokers who were conducting their business in an informal manner in coffeehouses. Initially it was formed as The Stock Exchange, later in the year 1986 it was reincorporated and made into a private limited company. The London Stock Exchange is the oldest stock exchange in the world history and is also one of the world's top three stock exchanges.

After its formation in 1773, the members raised money for the purpose of constructing a building as a permanent exchange site and this was built in Bartholomew Lane in 1801. In 1802 the members established the rules. In the year 1872 the ticker tape was introduced. In 1890 the Association of Stock Exchanges was founded.

In the year 1972 a new stock exchange building was opened. Later on this stock exchange was recognized as a private limited company. In the year 1998 it forged an alliance with Frankfurt Exchange. In 2000 the London Stock Exchange forged alliance with eight European exchanges.

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