London Stock Exchange Group (LSE)

What is London Stock Exchange (LSE)?

Wondering what the London Stock Exchange Group definition is? Simply known as the LSE Group, it is a major operator of international financial exchanges and most notably the London Stock Exchange, though it also include Borsa Italiana, MTS, the leading European fixed income market, technology platform MilleniumIT and the Financial Times Stock Exchange (FTSE).

The FTSE Index, or 'Footsie', operated by the LSE, is a list 100 companies trading on the LSE with the most valuable shares.

As of December 2014, the London Stock Exchange had a short-scale market capitalisation of over £4.5 trillion, making it the third largest stock exchange in the world.

Where have you heard about the LSE Group?

The London Stock Exchange Group is well known around the world as a capital markets business, operating a wide range of derivatives, bond and equity markets and offering international businesses and investors unparalleled access to Europe’s capital markets. It also made headlines in 2016 when it began a merger agreement with Deutsche Börse. However, the agreement subsequently fell through in March 2017.

What you need to know about the LSE Group

Early years

At the very beginning, in 1571, Queen Elizabeth I of England opened what was known as the Royal Exchange, which was founded by English financier Thomas Gresham. Exchange rates and commodities such as salt and coal were noted, but it was a far cry from the trading and the LSE Group we know today. This small group of traders and brokers would trade commodities in The Royal Exchange Building, though unfortunately this was destroyed in 1666 in the Great Fire of London.

In 1669 the group was re-established and would meet to trade in a coffee shop, ‘Jonathan’s Coffee House’. The first regulated exchange was opened on March 3rd, 1801. This was the beginning of the modern LSE Group.

Modern LSE Group

In 1973, the Group melded with 12 regional bourses, and in 1986, the Big Bang – or deregulation of for the securities market in London - ended separation between brokers and dealers, and opened membership to outside companies. Trading was also shifted from the floor to properly assigned dealing rooms. It was then that the LSe Group established themselves as a private, limited company.

In 2007 the LSE Group merged with the Milan Stick Exchanged, Borsa Italiana, which created the world's most diversified stock exchange. Since then the Group has announced partnerships with Oslo Børs in 2008 and it acquired a 51 percent stake in pan-European equities company Turquoise, a former rival, in February of 2010. 2011 saw it merge with the Mongolian Stock Exchange, and it hit financial headlines in March 2016 when it announced its biggest ever merger agreement. The agreement was between the London Stock Exchange Group and Deutsche Börse to create Europe’s largest exchange operator, in a deal worth over £20 billion. The deal between the LSE Group and Deutsche Börse ultimately collapsed in March 2017, due to antitrust concerns from the European Commission, who argued that the merger would create a “de facto monopoly in the markets for clearly fixing income instruments.”

Other failed mergers include the 2011 TMX merger, which fell through due to TMX opting for a partnership with Maple Group Acquisition Corporation instead.

2009 marks the beginning of the 'Rolet Era'. In May 2009, former broker at Goldman Sachs Group Inc., Xavier Rolet, was assigned as Chief Executive to the LSE Group. According to Bloomberg.com, Rolet “transformed LSE from a business mostly focused on cash equities into a group with strong positions in most parts of modern market structure.” During his role as CEO to date, he has built the world’s largest index business, FTSE Russell, and helped the firm’s market capitalisation swell from £800 million since 2009 to almost £14 billion today.   

The results of the 2016 EU referendum marked a watershed moment for the LSE Group. Rolet said of the times ahead that he “cannot imagine any sort of challenge that would compare to this one”, and that he is unsure about what the future holds for the LSE Group.

The Group is a global leader in indexing and analytic solutions. FTSE Russell offers thousands of indexes that measure and list market values around the world.

The LSE Group lists around 2,800 companies from 68 different countries from which you can buy stocks. This makes it the most international of exchanges. The different capital markets operated by the Group are:

Primary market: Based in London and Italy, this provides companies from all over the world with access to some of the world's most liquid capital.

Secondary market: The various systems operated by the LSE Group, including Turquoise, allow investors and institutions across the UK and Europe to trade quickly and efficiently.

Equities: The systems allow members to electronically trade equities from a wide range of companies of different sizes and values. The majority of trading is done on the Main and AIM markets in London and Italy. Turquoise also allows members to access and trade pan-European equities.

• The Main Market is only for established, highly performing countries, with stringent listing requirements. Over 1,300 of the London Stock Exchanges total company listings are traded on the Main Market. They have a total market capitalisation of over £4 trillion.
• On the other hand, the AIM trades in new enterprises with high growth potential; over 1,100 of these companies are traded on the AIM and have a total market capitalisation of over £63 billion.
• The final and smaller sections are made up of the Professional Securities Market (PSM) and the Specialist Fund Market (SFM). These have a total market capitalisation of approximately £6.5 billion.

Fixed income: Markets operated by the Group known as MTS, MOT, EuroTLX and ORB make possible the trading of European and US Government bonds as well as corporate bonds.

Derivatives: Derivative markets allow the trading of emerging market equity derivatives, and, in particular, Russian derivatives. Italian equities are operated by IDEM, while Turquoise and FTSE 100 Index Futures and Options have been developed to allow trading of International Order Book derivatives. 

Technology and Information Services offered by the LSE Group

The LSE Group supplies traders and institutions with real-time data and trading prices. This essential information is provided directly to clients as well as providers including Bloomberg or Thomson Reuters, who in turn sell the data to trading firms and investing institutions around the world. In order to keep up with the continued demand for highly automated trading, LSE uses an agile, in-house IT development called MilleniumIT. Millenium IT ensures fast and efficient information on trading services and up-to-date data, as well as selling and licensing exchange-related technology to companies all across the world.

What is the FTSE 100?

The FTSE 100 is the Financial Times Stock Exchange 100 Index, or sometimes nicknamed the “Footsie”. It lists the shares of the 100 companies trading on the LSE with the highest market capitalisation.

For an overview of the FTSE 100 Index, find out more here.

The LSE Group Foundation

In November 2010, the Group Foundation was founded to help support and contribute to areas of the communities in which it operates. The founding of this Foundation is an important event in the London Stock Exchange history, as it marks the beginning of their heavy involvement in supporting communities and charities. In April 2012, the LSE Group raised over half a million pounds in its first ever Charity Trading Day.

Find out more about the London Stock Exchange Group…

Want to find out more about the LSE Group, the New York Stock Exchange or NASDAQ-100? Then take a look at the the London Stock Exchange official site.