The London
Stock Exchange
The Royal Exchange Interior.
This picture captures the bustle and business that occurred within so much
a part of the British economy, http://www.intaglio-fine-art.com/prints/london-prints.html
The activities of the London Stock Exchange were crucial to the economic development of the British economy and the metamorphosis of England into an empire. The stock exchange became the market place, meeting place, and brokering place for financing companies, creating goods and trade, and for investors for earning money, thereby increasing the wealth and growth of the middle and upper middle class and the economy of the country. Stocks allowed the risks of investing to be shared across large numbers of people, providing the capital to launch new businesses and enlarge others. This funding had the effect of increasing the number of risky expeditions and joint venture companies that then allowed England’s Empire to grow to its enormous size.
In the 1600’s, the first joint stock companies were created to expand trade and explore new territories. These companies required large foundations of capital. The stock market allowed that, and in six years, companies increased in number from 15 to 150. By 1692 stock brokerage was developing into something more than a side occupation, and a joint stock venture was a more important financial strategy for funding new businesses and enterprises. A weekly publication called The Collection for Improvement of Husbandry and Trade began publishing stock prices. One of the first locations where stockbrokers met was the Royal Exchange which was a general market in London including merchants, druggists, and clothiers. As the number of brokers grew, stockbrokers soon began to overcrowd the Royal Exchange despite the fact that their numbers had been limited by “ an act to restrain the numbers of brokers and stock jobbers.”[1] As a result of the overcrowding and the new limits on numbers, the stockbrokers began congregating at various London coffee houses to make their deals. The most famous of these was Jonathan’s. Business was good but there was some dishonesty among brokers, an important problem in the system, and in an effort to reduce the difficulties, the brokers banned dishonest people from the coffee houses, posting a list of offenders. Later, in order to more effectively regulate themselves, a limited group of brokers formed and rented Jonathan’s coffee house, excluding any questionable people. In order to get around a suit limiting brokers at Jonathan’s, in 1773 this group of brokers purchased their own building and named it the London Stock Exchange. Success was reached when the members of the now London Stock Exchange developed a code of rules so that they could levy fines for illegalities and ban wrongdoers from the working at the exchange. [2]
The regular and increasing investment in stocks, bonds, and securities was an extremely important development in England’s financial growth. Companies of all sizes could now find the capital to be created and to grow. Government projects could be funded in this manner as well. At the same time, investors could make money by investing in companies and projects. The London Stock Exchange provided a place where these different business transactions could take place easily. People could hear about deals and brokers could put them together. The borrower and the lender benefited, and the amount of capital grew, and then this is turn could be used to create more money. The London Stock Exchange was located ideally, near the Bank of England, near the central government of England, and in the financial center of the country. Also, London was the center of trade within England and with outside ports and countries.