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Big Bang: Meaning, History, Consequences

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Updated June 22, 2023

What Is the Big Bang?

The Big Bang refers to the day the London Stock Exchange (LSE) was deregulated and became a private limited company on Oct. 27, 1986. It is considered an achievement of the Conservative government led by Margaret Thatcher and helped transform the City of London into a leading international financial center.

Key Takeaways

The Big Bang refers to the day the London Stock Exchange (LSE) was deregulated on October 27, 1986.
After deregulation, the volume of shares traded on the LSE and its market capitalization increased.
The Big Bang is considered an achievement of the Conservative government led by Margaret Thatcher.
Deregulation eliminated fixed commissions, authorized firms to represent investors, opened the London Stock Exchange to foreign firms, and implemented an electronic platform.

Deregulation of the LSE

In 1983, the London Stock Exchange was embroiled in an 澳洲幸运5官方开奖结果体彩网:antitrust case brought forth under the previous government by the Office of Fair Trading. At issue were rules on 澳洲幸运5官方开奖结果体彩网:commissions, the independence of jobbers and brokers,🍸 and the laꦇck of foreign membership on the exchange.

On October 27, 1986, Prime Minister 澳洲幸运5官方开奖结果体彩网:Margaret Thatcher and finance minister Nigel Lawson implemented the "Big Bang" to bring reform to the London markets. Before the Big Bang, the LSE trailed other exchanges. The 澳洲幸运5官方开奖结果体彩网:New York Stock Exchange (NYSE) was the largest market worldwide by turno🐻ver rate, while the LSE turned over 1/13 of the volume transacted by the NYSE.

Fast Fact

Jobbers, also called "stock jobbers," acted as 澳洲幸运5官方开奖结果体彩网:market makers. They held shares, created market liquidity by buying and selling securities, and matched investors' buy and sell orders through brokers🦩 who were not allowed to make markets.

Big Bang Policies

Eliminated fixed commissions on securities trading
Authorized firms to represent investors and execute wholesale trades
Opened the London Stock Exchange to foreign firms
Implemented an electronic platform instead of floor-based trading

Consequences of the Big Bang

The Big Bang allowed more competition by ending fixed commissions, enabled mergers and takeovers by ending the separation of dealers and advisors, and opened London's market to international banks.

The changes led to significant changes in the financial markets throughout London. Large banks overtook old firms led to the establishment of the Financial Services Authority (FSA), which regulated the financial services industry in the United Kingdom from 2001 to 2013. As the concentration of power moved to large corporations, this change trickled throughout global 澳洲幸运5官方开奖结果体彩网:financial systems.

What Issues Sparked Deregulation of the London Stock Exchange?

The Big Bang focused on the elimination of overregulation. The solution found in the Big Bang supported the doctrines of 澳洲幸运5官方开奖结果体彩网:free-market competition and meritocracy.

How Did Deregulation Affect the London Stock Exchange?

The volume of shares traded on the London Stock Exchange and its market capitalization increased. London became a leader in bond, commodities, and currency markets.

What Organization Regulates the London Stock Exchange?

The Financial Conduct Authority (FCA) regulates financial services firms and financial markets in the U.K.

The Bottom Line

The Big Bang occurred on October 27, 1986, when the London Stock Exchange (LSE) was deregulated and became a private 澳洲幸运5官方开奖结果体彩网:limited company. Deregulation is considered an achievement of the Conservative government led by Margaret T🎃hatcher, which opened the London Stock Exchange to foreign firms and improved tra꧒ding.

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