IV The London Stock Exchange

EXTRA FACTS

• At the time of the attack on Pearl Harbour, America introduced war bonds to enlist the help of the public.

• During the crash of 1929, the Dow crashed by 30 points. After reaching a high of 469.49 on 19 September the Dow plummeted by 51 per cent. On 29 October 1929 the US stock market lost $14 billion of value.

• The Dow Jones Average looks higher than an average stock price due to its calculation according to a special formula.

• The term 'broker' was originally used for wine retailers and was first used around 1622 to mean 'an agent in financial transactions'.

• In the 1870s, traders on the New York Stock Exchange wore top hats and swallowtail coats.

• Fixed commissions ended on 1 May 1975, America's May Day.

• In 1914, the New York Stock Exchange closed for three months when war was declared.

EXERCISES I. Answer the following questions:

1. What do you know about the origin of stock markets?

2. What are the largest stock markets in the world?

3. What did the rapid development of communications allowed to do?

4. Who are the participants of the stock market?

5. What is the difference between the primary and the secondary markets?

6. What types of stock markets do you know?

7. What is the difference between them?

II. Rates. Translate the following: at any rate

to value something at a low/high rate second rate first rate

advertising

of discharge of discount of depreciation of birth of profit /return of exchange of duty of production

agreed

compound growth

crime

dividend

RATE

dollar

interest

net

pulse

prime

space

Note: RATE - норма; розмір; рівень; ставка: тариф: такса: розцінка; курс; ціна; швидкість; частота; темп; процент; частка: коефіцієнт; розряд; сорт; місцевий податок; комунальний податок.

III. Choose the words and word combinations on the right which have the same meaning as the ones on the left.

1. market	a) a distinct parcel or portion of anything
2. the rate	b) beforehand
3. available	c) relating to or forming the end of extremity

106 PART II. FINANCE

4. commodity	d) the view for the purpose of discovering errors
5. in advance	e)exchange
6. on the spot	f) to move backward and forward
7. terminal	g) merchandise
8. to inspect	h) accessible
9. a lot	i) comparative value or amount
10. to fluctuate	j) immediately

a) Open the brackets putting the verbs in the correct form.

b) Describe the changes on the London Stock Exchange brought about by Big Bang.

The London Stock Exchange (LSE) (to be) the principal market for the trading of equities, other corporate securities and government debt in the UK.

The London equity market (to have) the third largest turnover in the world, after Tokyo and New York. Organized dealing in stocks and shares in London (to start) at the end of the 17th century, when much of it (to take) place in the coffee houses in the City of London. At the beginning of the 19th century the London Stock Exchange (to obtain) its constitution and a building of its own.

Now it is a dealership market: the great majority of customer orders (to transact) with a market maker who quotes prices at all times at which he stands ready to buy or sell. In this respect it (to differ) sharply from the more common public auction markets such as New York, Tokyo or Paris where the bulk of customer trades cross directly with each other. The market (to undergo) substantial change at the time of Big Bang in 1986, and its current structure is modelled in part on that of NASDAQ (National Association of Securities Dealers Automated Quotations), the US over-the-counter market.

Prior to 1986, membership of the stock exchange (to restrict) to partnerships. Member firms (to be) either brokers or jobbers. Brokers were not allowed to trade on their own account: they (to act) as agents for their customers, and transacted their orders with jobbers. The commission structure was fixed. Jobbers were obliged to make a two-way market in securities, and (to deal) with brokers as principals. They were prohibited from dealing directly with customers. Dealing (to take) place on the floor of the exchange.

The changes which were instituted in the period up to October 1986 were designed to liberalize the activities on the stock exchange: the rule restricting membership of the exchange to partnerships (to remove), fixed commissions were scrapped: the separation between broking and jobbing (to end); member firms became broker-dealers, free to act as agents and as principals. Those who wished to do so could register as market makers in specified stocks. At the same time, the opportunity (to take; to modernize the trading and quote dissemination system. A computerized system (to install) which showed the price quotes of all market makers in all stocks. Trades had to be reported electronically within five minutes.

The effects of Big Bang (to be) generally beneficial for customers dealing in size in liquid stocks.

The stock exchange (to be) the competent listing authority for the UK. The main requirements for having a listing in London are a 3-year-audited track record, a capitalization in excess of £700,000, at least 25 per cent of which must be in public hands, and the submission of appropriate listing particulars. In addition the company (to require) to release all necessarv information for shareholders and to the public to appraise the position of the company at all times. Companies have to pay to the exchange a fee on listing and an annual fee thereafter. The stock exchange (to be) a private limited company owned by its individual members.

The London Stock Exchange increasingly (to affect) by the legislation of the European Community. This process has the aim of creating a single European securities market.

UNIT 5. STOCK MARKETS 107

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