The stock market is not in its fundamentals greatly different from the new Covent Garden, Smithfield or Billingsgate markets. Whether you are dealing in turnips, pork or haddock, or the shares of Marks & Spencer, it is just a matter of buyers, sellers, an agreed price, and usually a middleman. And just as the food markets do not encourage people to amble in and ask for half a pound of carrots, so the Stock Exchange is nervous about private investors poking into its electronics and therefore requires an intermediary to feed the investor’s instructions into the computer.
In Britain the first recorded joint-stock company (as they were then called) was founded in 1553 to finance an expedition to the Orient via a north-east passage. Two of the ships sheltered from storms in northern Scandinavia and all the officers and crew froze to death. The third managed to reach Archangel and then went overland to Moscow – which was as near to the Orient as they got – where the Tsar, Ivan the Terrible, agreed a trading link. That seemed good enough: the link created business confidence, so others followed the technique for raising money.
With the growing number of joint-stock companies being created, a secondary business arose to trade holdings. As with so many of London’s financial institutions (Lloyd’s of London, the insurance market and the Baltic Exchange are other examples), it grew out of a coffee house, in this case New Jonathan’s. As business grew, the traders moved into a succession of their own premises and in 1773 acquired the name of Stock Exchange.
It has not been an untroubled history. One of the most notorious disasters is the South Sea Bubble. It was not unique either in the shady background or the unhappy consequences.
There used to be 20 other exchanges around the country but they were amalgamated into the one at Threadneedle Street, next to the Bank of England. The rather grand building is now almost wholly superfluous – it does not even house the computer that looks after the trading. The market’s current full official name is the International Stock Exchange of the United Kingdom, generally referred to as just the London Stock Exchange. It has two main components: first, the official list, which is the main market of major companies. This is divided up into groupings by trade. There is a section for distribution, one for banks, another for breweries, plus one called Techmark (or techMARK as the Stock Exchange calls it in an attempt at trendiness in its typography) for high-tech companies. Second, there is the Alternative Investment Market, which is for young companies which, by their nature, do not have the trading record demanded for a full listing.