4. Lombard Street.—The London Stock Exchange is but one institution among many that make London so powerful as a financial center, just as the New York Stock Exchange is but one element in Wall Street. "Lombard Street" has much the same general sig nificance as the term "Wall Street" with us and in cludes the Bank of England, the joint-stock banks, the bill brokers and other moneyed institutions that go to make up what Walter Bagehot, the famous 'English financial writer, described as "by far the greatest com bination of economical power and economical delicacy that the world has ever seen. . . . Money is econom ical power." But there are other terms in London that correspond more or less with Wall Street. Thus Capel Court is most closely associated with the Stock Exchange, and Threadneedle Street with the Bank of England. However Lombard Street is the more general term.
With the founding of the Bank of Venice about 1157, banks began to flourish among the Italian cities and by the end of the fourteenth century they began to spread to other lands. Banking houses were es tablished in foreign countries particularly by mer chants of Lombardy, who were called Lombards. Ac cordingly some traveled to England and established a center in London which accounts for the name of Lombard Street. Gradually the Italian cities lost their influence and supremacy in financial matters passed to the Dutch. A century after the Bank of England made its appearance in 1694, the British Isles had become the world's leading financial power, a distinction which they enjoyed without question till the beginning of the present war.
The first home of the London Stock Exchange was in the rotunda of the Bank of England. Later it moved to Lombard Street, then Change Alley, Sweet ings Alley and Old Jonathan's Coffee House. The latter place burned down in 1748 and in its place arose New Jonathan's Coffee House, which twenty-five years later was given the title of "The Stock Ex change." The record of this transaction reads "the brokers and others at New Jonathan's came to the resolution that, instead of its being called New Jona than's, it should be called the Stock Exchange which is to be wrote over the door." British government bonds, "consols," fluctuated so widely in price during the Napoleonic Wars that the growth in wealth and membership of the Exchange warranted a new building. So, in 1801, a building was constructed in Capel Court with a membership of five hundred. The Constitution of the Exchange as then amended and adopted remains to this very day in essence, altho new rules and regulations have been added to meet new conditions.
5. Organization and M a chin ery.—The management of the London Stock Exchange rests in the hands of two bodies, the Board of Managers and the Com mittee. The Board of Managers consists of nine members who represent the "shareholders" or "pro prietors" of the Exchange. Fees for admission, ap pointment of practically all the officials and the super vision of the real property of the Exchange are left to their care. On the other hand, the Committee, comprising thirty members, looks after the technical details involved in the management and trading of the Exchange, and corresponds somewhat to the Govern ing Committee of the New York Stock Exchange.
Before going into detail regarding the membership, it may be well to explain the terms "shareholders" and "proprietors." When, in the year 1801, the "new" structure was built in Capel Court not all the mem bers subscribed to the building. The wealthier in dividuals who provided the capital demanded in re turn that to insure the safety of their investment, they be permitted to control the finances of the Exchange. In this way, two classes of members made their ap pearance, proprietors and members.
In order to become a member four conditions must usually be met by the candidate. First, he must pay an entrance fee of 500 guineas. Second, he must se cure three individuals, who are already members of the exchange, to vouch for him. This procedure is quite different from that of the American exchanges and has a peculiar significance. These sponsors must agree to be responsible for the sum of 500 guineas each for four years. In case their protege becomes bankrupt and is unable to pay his obligations, the sums for which they stand security are forfeited. Third, the candidate must purchase three shares of the Stock Exchange. In 1913, each share was worth £190, but in April 1914, the average price was £165. The Exchange has issued 30,000 shares each £13 paid. Dividends amounting to £10 an nually are declared on each share as a rule. Finally, a candidate must buy a nomination from a retiring member which costs from £40 to several hundred pounds according to the demand and condition of the market.
A less expensive and easier way of entering the Exchange is also provided. If a man serves four years as a clerk in the Stock Exchange, special con cessions are granted to him. Instead of three sources of surety only two need be secured and he is required to buy but one share of stock of the Exchange.