The London Stock Exchange plays a large role in Murder at Somerset House, Book 9 in my Wrexford & Sloane mystery series, so I thought I would give you a quick look at its quirky history up to the time of my story.
The first stock exchange in England was the Royal Exchange, founded in 1571 by Thomas Gresham, with the approval of Queen Elizabeth I. Another milestone in the country’s financial history occurred in 1693, when the first government bonds were issued and the Bank of England was formed. As for the London Stock Exchange, its beginnings were far more rough-and-tumble.
During the 17th century, stockbrokers tended to be a raucous crowd and in 1698 they were banned from the Royal Exchange because of their rowdy behavior. And so they took to meeting informally in the coffeehouses in the nearby area. Jonathan’s Coffeehouse became the most popular place as a fellow named John Casting, began posting broadsheets there several times a week listing the prices of commodities, offerings and exchange rates.
Using Casting’s list—which became known as “the Course of the Exchange and Other Things”—the stockbrokers began to hold their own auctions. A candle was lit and the bidding continue until the candle burned down to a stub. These “by the inch of a candle” auctions became so popular that more and more stockbrokers participated, and more and more companies began putting their stock up for sale there.
These informal sales continued well into the 1700s, and due to their popularity, they were moved to larger quarters at Garraway’s Coffeehouse. But then, a group of 150 stockbrokers who traded regularly decided to form a more formal group, and in 1773, they moved to their own building in Sweeting’s Alley, which they dubbed “New Jonathan’s.” It contained a large area for trading and a room that served as a salute to their heritage. The group now began to call themselves the Stock Exchange. At first, stockbrokers only had to pay an entrance fee to come in and trade securities. But after a series of frauds occurred, the Stock Exchange required an annual membership starting in 1801, which turned it into a Subscription Room, open only to members. A new building was constructed at Capel Court, adjacent to a popular boxing emporium run by the famous pugilist Joseph Mendoza—and that led to them being formally recognized as the London Stock Exchange.
However, there were no clear formal rules governing the activities of the Stock Exchange, which soon became problematic as trade volume was rapidly increasing. In 1812, the General Purpose Committee, urged on by the famous financier, David Ricardo—who also figures prominently in the book—passed a set of recommendations which quickly became ratified as the first rulebook. It spelled out procedures for trade settlements, defaults and other such details. (As a fun side note, forbidden activities included setting off fireworks and playing with footballs.)
