The sudden deregulation of London-based securities markets (such as the London Stock Exchange) which took place on October 27, 1986 and heralded a major step toward a single world financial market.
The deregulation, which stimulated financial innovation and allowed new entrants to provide financial services, included the abolition of fixed commission charges and the separation between stockjobbers and stockbrokers. In other words, firms was enabled to act both as brokers – for investors -and ‘jobbers‘ – essentially market makers. The two roles had previously been kept apart. Furthermore, the deregulation marked a shift from open outcry to electronic trading.
Foreign firms, such as Germany’s Deutsche Bank and the US’s Goldman Sachs, were also allowed to buy into UK stockbrokers and compete for business against the established boutique home operators. Besides, the range of investments the private investor could make changed following Big Bang. In addition to buying shares or traditional funds, investors are able now to trade more sophisticated products, such as contracts for difference, covered warrants and exchange traded funds.
This day was dubbed ‘big bang’ because of the intensified market activity expected from a set of measures designed to precipitate a comprehensive alteration in the market structure. The big bang is comparable to May Day in the United States.
