What is the UK Stock Market LSE — London Stock Exchange.
The UK stock market is one of the oldest in the world. It is also the largest by capitalization in Europe today.
In the UK stock market, the London Stock Exchange (LSE) is the key and dominant stock exchange. It is by far the most international exchange in the world, as it handles about 50% of the total turnover of international equity trading.
The London Stock Exchange equity market has two segments: the Main Market and the Alternative Investment Market (AIM).
The main market is for large, successful companies and is where the blue chips of UK corporates trade. The main market has two separate segments: techMARK, where shares of innovative technology companies are traded, and techMARK media science, for shares of healthcare companies.
For a company to be admitted to the main market, its shares must be admitted to trading on the Exchange and admitted to the Official List by the UK Listing Authority. There are two types of primary market listing: primary listing and secondary listing.
The Alternative Market as a segment of the London Stock Exchange’s listed equity market was created in 1995, replacing the Unlisted Securities Market (USM), and has grown rapidly over the years since.
During that time, the number of UK companies whose shares are traded in this segment of the market has grown by more than 10 times. Shares of smaller but steadily growing companies are predominantly traded on the alternative market. Many of these companies have IPO’s on the alternative market. Some of them, having achieved considerable success, have gained access to the main market. Among the main advantages of the alternative market, there are no stringent requirements for the company, a relatively simple procedure of admission to the market, flexible regulatory system.
Main instruments of the British stock market
The UK is the world’s fourth-largest exporter of trade and accounts for approximately 10% of the world’s exports of services — banking, insurance, brokerage, consulting, etc. The UK’s economy continues to be dominated by traditional industries based on the country’s rich deposits of natural resources. Traditional industries based on rich deposits of natural resources in the country and on the coastal shelf continue to occupy a significant place in the economy of the United Kingdom.
Companies whose shares are “blue chips” on the British stock market are from the oil and gas, mining and chemicals, banking and insurance sectors, and consumer goods manufacturing.
The leading UK company whose shares carry the most weight on the stock market is one of the world’s largest bank holding companies — HSBC Holdings PLC. Also among the blue chips, are the world’s second-largest publicly traded oil corporation, BP PLC; the owner of the world’s largest network of petrol stations, Royal Dutch Shell PLC; the world’s second-largest mobile phone operator, Vodafone Group PLC, and other well-known corporations.
British stock indices are represented by the FTSE index family (Financial Times Stock Exchange Index), the most famous of which is the FTSE 100 index, which includes shares of the hundred largest British blue-chip companies by capitalization.
The market value of the shares comprising the FTSE 100 Index is approximately 70% of the UK’s total capitalization. The base level of the FTSE 100 Index was taken as 1,000 points on 3 January 1984.
The FTSE 250 Index describes the market condition of medium-sized companies, the volume of capitalization of which represents about 20% of the British stock market. It is calculated on the shares of 750 UK companies and is in turn divided into 8 industry indices and 32 sub-indices. All FTSE indices are calculated in real-time on the London Stock Exchange every working day.
Organization of stock trading
The shares of British issuers are traded on the London Stock Exchange through two main electronic trading systems: SETS (Stock Exchange Electronic Trading Service) and SEAQ (Stock Exchange Automated Quotation System).
The SETS system introduced in 1997 is based on the order-driven system. An order to buy/sell securities entered into the system is automatically executed if there is a counter order. The most liquid shares of UK companies, included in FTSE 100 and FTSE 250 indices, are traded in the SETS system. The aggregate value of shares traded in SETS is rapidly growing.
SEAQ system, similar to American NASDAQ, is based on a quotation-driven system: each share admitted to trading must have at least two market-makers, i.e. exchange members obliged during the working day from 8.00 to 16.30 to quote the security, name its purchase, and sale prices and make transactions at the best prices in the volume prescribed by the Normal Market Size. In SEAQ deals with shares of alternative market participants not traded in the SETS system are concluded.
Clearing and settlement system
The vast majority of UK equities are settled on CREST through Euroclear UK & Ireland-EUI, the central UK depository. The CREST electronic settlement system is integrated into the Euroclear Group’s technology platform and is linked to the Bank of England’s electronic payment system. EUI’s clients are professional securities market participants, both UK residents and non-residents.
Following existing UK stock market practice, settlements on trades in these securities are made on the third business day.
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