What is the London Stock Exchange?

If you’ve ever heard someone say “the market’s up today” or “shares fell on the London Stock Exchange”, you might have wondered exactly what they mean. What actually is the London Stock Exchange? Where is it? What goes on there? And why does it matter to you?

Here’s everything you need to know, in plain English.

What is the London Stock Exchange?

The London Stock Exchange — almost always shortened to the LSE — is the main marketplace in the UK where shares in publicly listed companies are bought and sold. Think of it as a giant, highly organised marketplace, except instead of fruit and vegetables, what’s being traded is tiny slices of ownership in some of the biggest companies in Britain and beyond.

It’s one of the oldest and largest stock exchanges in the world. It was formally established in 1801, though informal share trading in London goes back much further — to the coffee houses of the 17th century, where merchants would meet to buy and sell.

Today the LSE is part of the London Stock Exchange Group (LSEG), a publicly listed company in its own right, and it operates from offices in Paternoster Square in the City of London, just a short walk from St Paul’s Cathedral.

What actually happens at the LSE?

Companies that want to raise money from the public can apply to have their shares listed on the LSE. Once listed, those shares can be bought and sold by anyone — individual investors, pension funds, insurance companies, banks, hedge funds. Anyone with a brokerage account.

In the old days, this trading happened on a physical floor with traders shouting at each other. That era ended in 1986 with what became known as the Big Bang — a deregulation of financial markets that shifted trading from the floor to computer screens. Today, virtually all trading on the LSE happens electronically.

The price of shares is set by supply and demand. If more people want to buy a particular share than sell it, the price goes up. If more want to sell than buy, it falls. This happens continuously throughout the trading day, which runs from 8am to 4.30pm, Monday to Friday.

The different markets within the LSE

The LSE isn’t one single market — it’s actually divided into different sections, each aimed at different types of company.

The Main Market is where the biggest, most established companies trade. To list here, a company has to meet strict requirements set by the Financial Conduct Authority (FCA) — around its size, trading history, and the proportion of shares it makes available to the public. This is where you’ll find household names like BP, Lloyds Banking Group, Unilever, and Rolls-Royce.

AIM — the Alternative Investment Market — launched in 1995 and is designed for smaller, younger, or faster-growing companies that may not yet meet the requirements of the Main Market. The rules are lighter, which makes it easier for smaller businesses to list. But lighter rules also means higher risk for investors — AIM companies can be much more volatile.

AQSE — the Aquis Stock Exchange — is a smaller, newer exchange that operates separately but alongside the LSE, providing another route to market for smaller companies.

The FTSE indices

You can’t talk about the LSE without mentioning the FTSE indices — pronounced “Footsie”.

An index is simply a way of measuring the overall performance of a group of shares. The most famous is the FTSE 100, which tracks the 100 largest companies listed in London by market capitalisation (total share value). It’s the number you hear on the news — “The FTSE closed up 1.2% today.” When people say “the market”, they usually mean the FTSE 100.

The FTSE 250 covers the next 250 largest companies below the FTSE 100. These are still substantial businesses, but smaller than the giants in the top 100. Many investors consider the FTSE 250 a better reflection of the UK economy, since FTSE 100 companies often earn most of their money overseas.

The FTSE All-Share covers all companies listed on the LSE’s Main Market — around 600 companies in total.

Companies move between indices as their size changes. If a FTSE 250 company grows large enough, it gets promoted to the FTSE 100. If a FTSE 100 company shrinks, it gets relegated. These index changes happen quarterly and can move share prices, because funds that track an index automatically buy or sell shares when a company enters or leaves it.

Why does the LSE matter to ordinary investors?

Even if you’ve never bought a share in your life, the LSE almost certainly affects you. If you have a pension — workplace or personal — it’s very likely that some of your money is invested in shares listed on the LSE. The same goes for ISAs and many savings products.

For those looking to invest directly, the LSE provides access to thousands of companies across every sector imaginable — energy, banking, retail, pharmaceuticals, technology, mining, consumer goods. You invest through a stockbroker or an investment platform, not by contacting the LSE directly.

A quick note on settlement

When you buy or sell shares, the transaction doesn’t complete instantly. There’s a settlement period — currently two working days after the trade, known as T+2. This is the time it takes for the shares to officially change hands and the money to move. It’s worth knowing because it affects when your money actually arrives if you sell, and when you’re officially on the shareholder register if you buy.

TL;DR — the short version

• The London Stock Exchange (LSE) is where shares in publicly listed UK companies are bought and sold
• It has three main sections: the Main Market (biggest companies), AIM (smaller companies), and AQSE (smaller still)
• The FTSE 100 tracks the 100 biggest companies on the LSE — it’s the headline number you hear in market reports
• Trading runs 8am–4.30pm, Monday to Friday, and happens electronically
• When you buy or sell shares, settlement takes two working days (T+2)
• You invest through a broker or platform — not directly through the LSE

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This article is for information only and does not constitute financial advice. The value of investments can go down as well as up. If you are unsure about whether an investment is right for you, seek advice from a qualified financial adviser.

This article is for informational purposes only and does not constitute financial advice. Investment values can go down as well as up. Always do your own research before making any financial decisions.