Requirements For Listing On The London Stock Exchange:

Becoming listed on the LSE is a complicated process. The London Stock Exchange listing rules that must be fulfilled before a company can 'go public' follow.

The process of floating a company and their ongoing regulation is controlled by the UKLA (UK Listing Authority) which is a part of the FSA. The UKLA's listing requirements include:

- Directors must sign a listing agreement which commits the board to high standards of behaviour and reporting levels to shareholders.

• The directors must prepare a prospectus (known as listing particulars) to potential investors.

• At least 25% of the share capital must be in the hands of the public so that the shares can be actively traded and remain reasonably liquid.

• The company should have at least three years of accounts.

• The company needs a sponsor (bank, stockbroker or other professional adviser) to guide and advise and to reassure the UKLA that the company is of sufficient quality.

Once listed on the London Stock Exchange, the company and directors have continuing obligations, which include: 

• Giving the market any price sensitive information as quickly as possible.

• To undertake to disclose information fully and accurately.

• The directors must follow strict guidelines relating to the buying and selling of their own shares in the company.

These are just a few main rules and they show you what is required of companies hoping to list on the main market.

One of the attractions of the Alternative Investment Market, AIM, is that these requirements are significantly less onerous and therefore costly. This helps to attract younger and more rapidy growing companies to market.

How The LSE Information System Works And What Are The Two Main Groups Of Stocks

The London stock exchange is actually divided into two parts. The first part is the main market, for which companies need at least three years of audited accounts to become members. The second part of the exchange is the Alternative Investment Market, otherwise known as AIM.

AIM offers a market for those shares that either cannot obtain or do not want a full listing on the main market (also known as the Stock Exchange's Official List). AIM is targetted at smaller companies with fewer costs and formalities in obtaining a listing. This often attracts younger and fast growing companies.

The Alternative Investment Market started on the London Stock Exchange in June 1995 and at the end of 1996 it replaced the Unlisted Securities Market.

In the early days, AIM was viewed as a 'high tech' home for UK stocks, rather like the NASDAQ in America. However, this was in part due to the massive rise in technology stocks (TMT) in the late 1990s that became the 'Internet bubble'. 

AIM now hosts a wide range of small companies in almost every imaginable area - including a number of companies that are not even UK companies but wanted a UK listing.

It goes without saying that in many of the companies listed on AIM, liquidity is lower than might be the case elsewhere on the LSE. This is in large part due to the smaller relative size of AIM companies, but also because not all stockbrokers deal in AIM stocks.

How The London Stock Exchange Information System Works?

The London Stock Exchange is the oldest major financial market in the world but it is now no longer the largest. In March 2005 there were over 2500 companies quoted on the London Stock Exchange market including over 300 from outside the UK.

To be granted permission to be listed on the stock exchange companies must satisfy certain conditions and then others on an ongoing basis. One of the conditions is that companies must have a trading record of at least three years before they can obtain a listing. 

There are currently two different trading systems:

SEAQ is the Stock Exchange Automated Quotation System and is a quote-driven system. Market makers compete, transacting amongst themselves and dealing with the public through brokers (also known as dealers). Trading is done by phone.
 

SETS is the Stock Exchange Electronic Trading Service and is an order-driven system. It allows brokers to post orders and trade automatically through an electronic order book. This eliminated the market makers role. SETS is limited to FTSE 100 stocks and some FTSE 250 shares. 

London Stock Exchange Information System - SEAQ:

SEAQ stands for Stock Exchange Automated Quotation System.

Now there are more then 1500 listed companies whose bid and offer prices are quoted on SEAQ. SEAQ is essentially a price-information service and not a trading system. It can be accessed through a number of screen based information services. Trades are therefore carried out either by phone or online. SEAQ provides:

- prices quoted by market makers

- the number of trades reported (above £1,000 in value)

- the best bid/offer prices with upto three market makers prepared to deal

- an automatic trade execution service

If you need more informations please go to SEAQ 

London Stock Exchange Information System - SETS:

The basis of SETS was launched by the London Stock Exchange in 1997. It was designed to cater for FTSE 100 firms and the largest of the FTSE 250 companies. Since then the system has (as ever) undergone significant change. The main points of the SETS system are:

- London Stock Exchange SETS deals go through brokers. 

- The brokers enter buy and sell orders through an electronic order book. 

- Market makers have no role in the transaction - thus removing an added layer of costs.

There is no minimum order size. This is very useful to the private investor. The arrival of PEPs and ISAs (both tax advantaged investment plans which effectively hold shares in a nominee type account) meant that many private investors might own a portfolio of shares but never receive annual company accounts. SETS makes it easier to purchase small holdings (many investors now own a number of shares in their tax wrapper and just one share in their own name to ensure that corporate documentation arrives). 

Orders may be matched against more than one opposite trade in the order book. The Stock Exchange Electronic Trading System operates on a T+3 basis which means that the financial aspects must be completed on the third working day after the trade.

London Stock Exchange SETS orders are either:

- At best which means the trade is carried out at the best possible overall prices

- Execute and eliminate is also known as immediate execution. Any amount of an order that can be completed at a set price is done - everything else is discarded.

- Fill or kill involves the trade being done at exactly the terms specified in the correct volume - or nothing is done at all.

- Limit orders remain on the SETS screen. They are set for prices that are 'no worse than' and may be filled slowly over time. An expiry date (max of 90 days) prevents these orders running for too long.

If you need more informations please go to SETS

Now let's go and see what requirements a company has to meet, before it can be listed on the London Stock Exchange!

History Of The London Stock Exchange:

The London Stock Exchange, or LSE, is one of the world's oldest stock exchanges, with a rich history dating back to 1698. The exchange began its life in the coffee houses of 17th century London, when John Castaing began issuing "at this Office in Jonathan's Coffee-house" a list of stock and commodity prices called "The Course of the Exchange and other things."

The London Stock Exchange history is proof that from something small, a huge giant can be built. It can trace its history back more than 300 years. Starting life in the coffee houses of 17th century London, the Exchange quickly grew to become the City’s most important financial institution.


Important Years In History Of The London Stock Exchange:

1698 - John Castaing begins to issue 'at this Office in Jonathan’s Coffee-house' a list of stock and commodity prices called 'The Course of the Exchange and other things'. It is the earliest evidence of organised trading in marketable securities in London.

1698 - Stock dealers are expelled from the Royal Exchange for rowdiness and start to operate in the streets and coffee houses nearby, in particular in Jonathan’s Coffee House in Change Alley.

1720 - The wave of speculative fever known as the South Sea Bubble bursts. Details of this can be found in many investment books - especially those related to investor or crowd psychology. It makes for an instructive and entertaining read!! Without doubt, this has to be one of the most interesting times in London Stock Exchange history.

1761 - A group of 150 stock brokers and jobbers form a club at Jonathan's to buy and sell shares.

1773 - The brokers erect their own building in Sweeting’s Alley, with a dealing room on the ground floor and a coffee room above. The members soon name it the 'The Stock Exchange'.

1801 - On 3 March, the business reopens under a formal membership basis. On this date, the first regulated exchange comes into existence in London, and the modern Stock Exchange is born.

1812 - The first codified rule book is created.

1836 - The first regional exchanges open in Manchester and Liverpool.

1854 - The Stock Exchange is rebuilt.

1876 - A new Deed of Settlement for the Stock Exchange comes into force.

1914 - The Great War means the Exchange market is closed from the end of July until the new year.

1923 - The Exchange receives its own Coat of Arms, with the motto 'Dictum Meum Pactum' (My Word is My Bond). For many decades, this phrase summed up the code of those working on or in the exchange. 

1939 - The start of World War Two. The Exchange is closed for 6 days and reopens on 7 September. The floor of the House closes for only one more day, in 1945 due to damage from a V2 rocket – trading then continues in the basement.


London Stock Exchange In Modern History:

1972 - Her Majesty the Queen opens the Exchange's new 26-storey office block.

1973 - First female members admitted to the market.

1986 - Deregulation of the market, known as 'Big Bang': Ownership of member firms by an outside corporation is allowed. All firms become broker/dealers able to operate in a dual capacity. Minimum scales of commission are abolished. Individual members cease to have voting rights. Trading moves from being conducted face-to-face on a market floor to being performed via computer and telephone from separate dealing rooms. The Exchange becomes a private limited company under the Companies Act 1985.

1991 - The governing Council of the Exchange is replaced with a Board of Directors drawn from the Exchange's executive, customer and user base. The trading name becomes '“The London Stock Exchange'.

1995 - AIM is launched – read about it on other pages of this site.

1997 - SETS (Stock Exchange Electronic Trading Service) is launched to bring greater speed and efficiency to the market. The CREST settlement service is launched.

2000 - Shareholders vote to become a public limited company: London Stock Exchange plc.

2001 - London Stock Exchange plc lists on it's own Main Market in July.

Now let's go and see how trading is done on the London Stock Exchange!

What Is The London Stock Exchange (LSE), Better Known As The "City Of London"?

The London Stock Exchange, or LSE, is one of the world's oldest stock exchanges, with a rich history dating back to 1698. The exchange began its life in the coffee houses of 17th century London, when John Castaing began issuing "at this Office in Jonathan's Coffee-house" a list of stock and commodity prices called "The Course of the Exchange and other things." As it is organized today, the LSE has 4 main business areas that are offered to the public investors:

- Equity Markets - enabling companies from around the world to raise capital needed to grow, and by listing securities in a well regulated market. Access to these markets is provided through the Main Market and AIM. 

- Trading Services - providing a fast and efficient trading platform, to be used by brokers and firms around the world to buy and sell securities.
 
- Market Information Services - supplying high quality, real-time information and news to the financial community.
 
- Derivatives - expanding to become the world's most efficient and liquid market for equity derivatives. The EDX London hopes to move the LSE beyond their core equities markets. 

Other Important Facts About The London Stock Exchange:

The following are some of the facts and figures available for the London Stock Exchange. These statistics will allow you to understand the relative size of the exchange:

- There are more than 380 firms worldwide that trade as members of the London Stock Exchange.
 
- The exchange claims to be the most international of all stock exchanges, with companies from over 84 countries admitted to trading in their markets.
 
- The exchange is arguably the largest stock exchange in Europe.
 
- The LSE accounts for 63% of all European initial public offerings.
 
- In November 2010, there were around 12 million trades, involving 102 billion British Pounds.
 
- Around 2700 companies were listed on the London Stock Exchange at 2010. with a total market value of 3.8 trillion British Pounds. 

Let's go now to the history of the London Stock Exchange!