Its current premises are situated in Paternoster Square close to St Paul's Cathedral in the City of London.

Origin of share trading

The trade in shares in London began with the need to finance two voyages: The Muscovy Company's attempt to reach China via the White Sea north of Russia, and the East India Company voyage to India and the east.

Unable to finance these costly journeys privately, the companies raised the money by selling shares to merchants, giving them a right to a portion of any profits eventually made.

Exchange

The idea soon caught on (one of the earliest was the Earl of Bedford's scheme to drain the fens). It is estimated that by 1695, there were 140 joint-stock companies. The trade in shares was centred around the City's Change Alley in two coffee shops: Garraway's and Jonathan's. The broker, John Castaing, published the prices of stocks and commodities called The Course of the Exchange and other things in these coffee shops.

Licensing of brokers

In 1697, a law was passed to "restrain the number and ill-practice of brokers and stockjobbers" following a number of insider trading and market-rigging incidents. It required all brokers to be licensed and to take an oath promising to act lawfully.

The South Sea Bubble

Much excitement was caused by the South Sea Company, stoked by brokers, the company's owner John Blunt and the government. Having set up the unprofitable company nine years previously, the government hoped to wipe out the large debts accumulated by offering shares to the public.

Shares in the company, which had started at £128 each at the start of the year, were soon fetching as much as £1,050 by June. The bubble inevitably burst, with share prices plunging to £175, then £124.

The incident caused outcry, forcing the government to pass legislation to prevent another bubble, and it took a long time for the stock exchange to recover.

Threadneedle Street and Capel Court

Jonathan's burnt down in 1748, and this, plus dissatisfaction with the overcrowding in the Alley, made the brokers build a New Jonathan's on Threadneedle Street, as well as charging an entrance fee. The building was soon renamed the Stock Exchange, only to be renamed again as the Stock Subscription Room in 1801, with new membership regulations.

However, this too proved unsatisfactory, and the exchange moved to the newly built Capel Court in the same year. The exchange had recovered by the 1820s, bolstered by the growth of the railways, canals, mining and insurance industries (there were, however, problems with stags and dividend payments). Regional stock exchanges were formed across the UK. Bonds (or gilt-edged securities) also began to be traded.