The opening up of the stock exchange to non members coupled with the
abolition of fixed commission exposed the equity market to competition.
Almost all the stock broking firms of consequence changed hands – but because
few of the new owners had any idea what they had bought nor why they had bought,
other than that the opportunity was there and everyone else was buying, the
losses were horrendous.
Gradually – after a decade or so – it settled down and much of the prosperity
of the City today is down to that decision.
Yet it was probably a mistake in that no one foresaw these consequences. The
background to the deal was that the Office of Fair Trading had launched an
investigation into the anti competitive nature of the fixed commission system as
it minimised competition between brokers. The inquiry dragged on for years until
Cecil Parkinson, then the secretary of state at the DTI cut a deal whereby the
case was dropped in return for the stock exchange opening its doors.
It is ironic that it was the Conservatives that forced the market to change.
It is even more ironic that its motive for doing so was not born of some far
sighted vision of the City.
Rather the government simply wanted to make British business realise that it
had to get more competitive. Politicians being what they are thought there could
be no better way of ramming home this message than throwing the Stock Exchange
to the wolves.
The message of Big Bang then was nothing to do with globalisation. It was
simply that if the Exchange was not going to be protected, no one would be.
Anthony Hilton is finance editor of the Evening Standard
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