Jobbers: What They Were, Their Role in Stock Markets, and Their Legacy
AB
Summary:
Jobbers, known as market makers on the London Stock Exchange, played a crucial role in facilitating trading activities prior to the mid-1980s. This article explores the evolution of jobbers, their functions, and their eventual disappearance from the financial landscape. From their origins in the 19th century to their decline in the modern era, jobbers shaped the stock market in significant ways.
Understanding jobbers
Jobbers, also referred to as stockjobbers, were integral to the functioning of the London Stock Exchange before the mid-1980s. Acting as market makers, they held shares on their own accounts and facilitated liquidity by matching investors’ buy and sell orders through their brokers.
Evolution of jobbers
In the early 19th century, London boasted hundreds of jobbing firms, although little is known about their specific activities due to a lack of records. Over time, their numbers dwindled, culminating in their disappearance in October 1986, coinciding with the financial deregulation known as the “Big Bang.”
Role in market liquidity
Jobbers played a crucial role in providing liquidity to the stock market, particularly as the range of securities broadened during the 19th century. Their activities helped maintain a continuous market for various types of securities, contributing to market stability.
Decline and legacy
The decline of jobbers was precipitated by changes in market structure and the rise of institutional investors. By the eve of the “Big Bang,” only a handful of major jobbing firms remained on the London Stock Exchange. Despite their numerical decline, the marketability they provided persisted until their eventual disappearance.
Special considerations
The evolution of the jobber system mirrored the broader changes in the financial landscape, with specialization becoming more prevalent among market participants. The distinction between jobbers and brokers, while initially based on custom and tradition, was formalized in the London Stock Exchange rules in 1909.
Origins of stockjobbing
Stockjobbing emerged in the late 17th century following Britain’s Financial Revolution, which saw the establishment of joint-stock companies and regulated stock exchanges. Jobbers were instrumental in facilitating trading in these new shares, laying the groundwork for modern stock markets.
Disappearance of jobbers
The official disappearance of jobbers from British stock exchanges in 1986 marked the end of an era. Deregulation efforts spearheaded by then-Prime Minister Margaret Thatcher rendered jobbers obsolete, as electronic trading systems replaced traditional floor-based operations.
Frequently asked questions
What was the role of jobbers on the london stock exchange?
Jobbers acted as market makers, holding shares on their own accounts and facilitating liquidity by matching investors’ buy and sell orders.
How did the jobber system evolve over time?
The jobber system evolved from its origins in the 19th century to a more specialized form, with jobbers focusing on making a continuous market in specific types of securities.
Why did jobbers disappear from british stock exchanges?
The deregulation of financial markets in the UK, coupled with the introduction of electronic trading, rendered jobbers obsolete, leading to their disappearance from British stock exchanges in 1986.
What impact did the decline of jobbers have on market dynamics?
The decline of jobbers coincided with changes in market structure and the rise of institutional investors. While jobbers provided liquidity and market stability, their obsolescence paved the way for more efficient electronic trading systems.
Did jobbers have any successors in the modern financial landscape?
While jobbers themselves disappeared, their functions were absorbed by other market participants, such as electronic trading platforms and specialized market makers. These entities continue to play a crucial role in facilitating trading activities on stock exchanges globally.
Key takeaways
- Jobbers, or market makers, were pivotal in facilitating trading activities on the London Stock Exchange.
- Their role in providing liquidity and maintaining market stability was significant.
- The decline of jobbers paralleled changes in market structure and the advent of electronic trading.
- The legacy of jobbers persists as a testament to their historical importance in shaping stock market dynamics.
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