In the mile-square City of London, Britain's once staid financial heart, events are exploding in most ungentlemanly fashion. Venerable brokerage houses that have dozed along contentedly almost since Edwardian times are merging or being snapped up by marauding U.S., Japanese or French financial institutions. Pinstripe City men who have known each other since Oxford or Cambridge days are rubbing shoulders with rough-and-tumble stock traders who sport little of the old-school polish but plenty of the street savvy that has suddenly become worth unheard-of six-figure salaries. Unable to contain the activity, the City is bursting at the seams, as rapidly expanding investment houses sprawl farther along the Thames into London's formerly dreary docklands.
All the pandemonium is due to what the British are calling Big Bang, a code name for what amounts to a revolution that is sweeping local financial and capital markets. Formally, Big Bang refers to the deregulation of Britain's domestic securities markets, when the 218-member London Stock Exchange will abandon a system of fixed commissions for brokers. The Exchange will also drop a traditional separation between the brokers, who execute stock and bond trades for their clients, and the so-called jobbers, who handle the brokers' orders as well as manage their own hefty accounts. This upheaval, roughly akin to Wall Street's May 1, 1975 plunge into a newly competitive environment, is scheduled to occur on Oct. 27.
In one sense, however, Big Bang is already under way. As a warm-up to deregulation, the London Exchange on March 1 inaugurated Little Bang by inviting foreign firms and British banks onto its trading floors for the first time. The move spurred a wave of foreign invaders seeking to join the action. Tokyo-based Nomura Securities, the world's largest investment firm, and New York City's Merrill Lynch, the biggest U.S. broker, have already become Exchange members. Some 30 others plan to do the same.
Little Bang has also made London a special attraction for commercial banks. Britain has no equivalent of the U.S.'s Glass-Steagall Act, which prohibits % commercial banks from underwriting stocks and bonds as investment bankers do. Thus such institutions as Citicorp, the Union Bank of Switzerland and the Hongkong and Shanghai Bank have flocked to London seeking brokerage partners. In all, 64 of the Exchange's 200 brokers and jobbers have now been acquired by larger foreign or domestic firms, or have merged in self-defense.