The London Stock Exchange and the British shadow banking system

Andrew Odlyzko ()
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Andrew Odlyzko: University of Minnesota

No 17002, Working Papers from Economic History Society

Abstract: "Previously unknown basic statistics are obtained about the opera- tions of the London Stock Exchange (LSE) in early Victorian times. Integration of data from the Bank of England Archive with price reports, press coverage, and other sources produces estimates for volume of transactions, distribution of earnings among dealers, efficiency of the market, and the coverage of avail- able price lists. For example, it is found that for some securities, prices were reported for under 20% of transactions. The LSE was surprisingly small and by some measures also surprisingly efficient. Much of its efficiency appears to have come from its deep involvement in the “shadow banking system” of that era, a connection that appears to have been misunderstood and almost com- pletely neglected in the past. The low levels of activity, the dominance of small investors, and low cost of the system show the very early stages of the “fi- nancialization” of the modern economy and provide interesting perspectives on modern developments."

JEL-codes: N00 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-ban and nep-his
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