2. The Big Bang Tara Slobe Holly Morrison Karen Yarcho Kate Lindsay

3. Description Changes to the organization and practices to Britain’s financial center Sudden deregulation swept through London Stock Exchange Took place October 27, 1986

4. Description Prior to the “Big Bang”: – Membership to stock exchange was limited – Decline of status of British Securities Market – Technological development and the expansion of transactions were occurring

5. Description The “Big Bang” brought about the following: – Merged functions of jobber and broker – Introduced negotiated commission rates – Allowed banks and financial companies to own brokers/jobbers – Changed from open-outcry to electronic, screen-based trading

6. Description The “Big Bang” also brought about: – Market expansion – People of lower classes to participate

7. The Big Bang: Role of London as a Financial Center Margaret Thatcher: -British politician who served as Prime Minister -Believed London banking had two problems: 1)Overregulation 2) Domination of ‘Old Boy’s Networks’ -The Big Bang became the cornerstone of Thatcher’s reform program. Too much regulation in the market!!

8. BB’s Role of a financial center… Strengthened London’s place as a financial capital… - created a new class of ‘nouveau rich’ - Boom expanded beyond the city

9. Big Bang’s Contributions Deregulation of the Markets Less intimidation for prospective traders Abolished fixed minimum commissions Substantially increased market activity

10. Growth of Market post BB *£100,000 in October 1986 would now be worth… 339% increase !! 333% increase!! 48% increase

11. Margaret’s Vision: London will capture the market of internationally traded securities Equity securities from large Co’s Debt securities from Govt’s Leads to market integration of securities brokerage and other financial activities… with London being in the center!!

12. Advantages from Big Bang London’s place as a financial capital - arguably the world’s most important banking centre Economic boom created a new class of “nouveau riche” Brought on new ways of trading shares

13. Advantages from Big Bang City expanded from its former boundaries around the old “square mile” and redrew the capital’s skyline Hedge-fund managers and private- equity firms have gravitated farther west to posh Mayfair and St James's, helping to drive up office rents there and keeping trendy restaurants busy

14. Advantages from Big Bang Heathrow Airport is bursting at the seams, handling nearly 70m passengers a year when it was designed for 45m Far more foreign banks than any other financial centre and has the biggest slice of the foreign-exchange market A turning point in the city’s post-war history The city became more of a meritocracy

15. “There is just no comparison now between the city’s standing today and 20 years ago. London wouldn’t be in this position without Big Bang.” -David Lascelles

16. Disadvantages of the Big Bang Negative/dishonest atmosphere Speculation that the new era caused scandals such as the Collapse of the Barings Bank

17. Disadvantages of the Big Bang Two more rules were added in the late 1980’s to help out after the deregulation – not necessarily a disadvantage, but important to note. Its argued that these rules are meant to favour Londoners over others such as the U.S. – Markets that dealt with corporate shares were not obligated to trade with one another – The time frame as to when trades had to be reported changed

18. Disadvantages of the Big Bang Deregulation favours big companies and market giants Institutions that benefited from this change were foreign. – Ex. US banks benefited even though it was supposed to help London compete with them.

19. Post the Big Bang “New money” class created Property Boom. New developments in Docklands/Canary Wharf area Growth of specialist work force London is more competitive in foreign banking

20. Post the Big Bang Bottom Line: London is a much stronger financial center as a result of the deregulation

21. Discussion What do you think might have happened if the Big Bang had not occurred? What if the markets had never been deregulated? Do you remember why they call it the “Big Bang?” Are there any more reasons why its called the Big Bang?