An article in the December 1985 Bulletin described the background to the reforms taking place in The Stock Exchange and in the regulation of the financial services industry. This article traces the subsequent progress of those reforms and looks at more recent developments as they affect the structure of The Stock Exchange. The impact of these changes on various characteristics of the equity market, such as liquidity and transactions costs, is also considered. The emerging regulatory framework under the Financial Services Act is described, along with recent initiatives in international regulatory co-operation. The main points are:
- Since the package of Big Bang reforms was completed on 27 October 1986, the momentum of change in The Stock Exchange has been sustained by its merger with the International Securities Regulatory Organisation and the inauguration of its third tier equity market;
- The Exchange's new rules and the merger with ISRO have transformed its membership, bringing in well-capitalised firms, including British and foreign banks and securities houses, either through participations in existing members or through direct entry;
- The evidence so far indicates that the reforms have increased competition in the UK equity market, cut transactions costs and boosted liquidity;
The Financial Services Act reached the statute book in November 1986, and the focus has now switched to the preparation of the detailed rules of the Securities and Investments Board and the regulatory framework forming beneath it;
- A high priority now attaches to achieving co-operation between different regulators, both domestically and internationally.