The door is opening to the retail investor.
There have been many significant events in the evolution of ‘joint stock companies’ and stock exchanges around the world – ‘joint’ means jointly owned by a number of shareholders.
In the US, a profound change to the old order took place in 1971, when the Nasdaq Stock Market was founded by the National Association of Securities Dealers Automated Quotations. It was the world’s first electronic stock market and it paved the way for easier and cheaper access to stock markets for the retail investor – as well as the introduction of automated trading systems, which has not been entirely positive.
The New York Stock Exchange (NYSE) has responded to the challenge from the Nasdaq and most of its trading is now undertaken on electronic systems. However, the traditional stock jobbers on the trading floor – matching buyers and sellers using an auction process with ‘open-outcry’ – still retain a place on the floor of the NYSE.
It took some time after the Nasdaq burst onto the scene for the UK to react with the ‘Big Bang’ on 27th October 1986. The Big Bang was centered on the deregulation of the London Stock Exchange (LSE). The exchange was privatized and became a public limited company (plc). The cozy ‘club’ of LSE members was opened up to outside companies and the way was paved for the introduction of automated, electronic trading systems – which has revolutionized share trading in the UK. The days of stock jobbers and open-outcry on the floor of the LSE were rapidly swept away.
Previously, private investing had been an exclusive domain, with investors paying high commissions to their stockbrokers, who advised them on investments and kept them informed by phone. The investors would hold their share certificates and receive company reports by mail. With the advent of the Big Bang, stockbroking was going to get a lot more competitive and service-orientated, to the enormous benefit of the retail investor! […]