Big Bang (financial markets)

The phrase Big Bang, used in reference to the sudden deregulation of financial markets, was coined to describe measures including the abolition of the distinction between stockjobbers and stockbrokers on the London Stock Exchange by the United Kingdom government in 1986.

This change in the rules of the London Stock Exchange occurred on 27th October 1986. Big Bang (never "the Big Bang") was so called because the abolition of fixed commission charges precipitated a complete alteration in the structure of the market. One of the biggest alterations to the market was the change from open-outcry to electronic, screen-based trading.

Other reforms were enacted at the same time, and it was the aggregation of the measures plus the expected increase in market activity that led to the event being called "Big Bang".

In the UK, Big Bang became one of the cornerstones of the Thatcher government's reform programme. Prior to these reforms, the once-dominant financial institutions of the City of London were failing to compete with foreign banking. While London was still a global centre of finance, it had been surpassed by New York, and was in danger of falling still further behind.

Thatcher's government claimed that the two problems behind the decline of London banking were overregulation, and the dominance of elitist old boys' networks, and that the solution lay in the free market doctrines of unfettered competition and meritocracy.

The effects of Big Bang were dramatic, with London's place as a financial capital decisively strengthened, to the point where it is arguably the world's most important banking centre. An economic boom created a new class of nouveau riche that has persisted for two decades, and the boom expanded beyond the City into new developments in the Isle of Dogs area, particularly that of Canary Wharf.

Some critics have charged that the deregulation, and the atmosphere that it created, were responsible for such scandals as the Barings collapse, although others argue the opposite, that the failure to completely disestablish the old boys' networks was to blame.

Subsequent similar actions, such as the deregulation of the Japanese financial markets in 2001, have analogously also been tagged with the phrase Big Bang.

ee also

*The Wimbledon Effect

References

cite news
last = FT
first = staff
title = Revolution hailed but City warned of a looming fight for supremacy
work = In depth > Big Bang
publisher = Financial Times
date= 2006-10-29
url = http://www.ft.com/indepth/bigbang
accessdate = 2006-10-29

cite news
last = Fortson
first = Danny
coauthors =
title = The day Big Bang blasted the old boys into oblivion
publisher = The Independent
date= 2006-10-29
url = http://news.independent.co.uk/business/analysis_and_features/article1938279.ece
accessdate = 2006-10-29

cite news
last = Treanor
first = Jill
title = Revolution hailed but City warned of a looming fight for supremacy
publisher = The Guardian
date= 2006-10-27
url = http://business.guardian.co.uk/story/0,,1932560,00.html
accessdate = 2006-10-29

External links

* [http://wgordon.web.wesleyan.edu/papers/bigbang.htm Effects of Japan's Financial Big Bang on Consumers]