The London Stock Exchange

Question 1

What are the roles and responsibilities of the London Stock Exchange (LSE)?

Answer 1

1. Authority responsible for admitting public companies for listing.
2. Has two main markets -
   A. Official List
   B. AIM
3. It is a recognised investment exchange providing a market in a wide range of securities.

Question 2

Expand in further detail on the two main markets on the LSE - official list and AIM

Answer 2

1. Companies can be admitted to the Official List if they meet the listing requirements set out by the UKLA
2. If they don’t meet the criteria, but still wish to obtain admission to the stock exchange - they can apply admission to the second-tier market, AIM
3. Admission to AIM has lighter requirements than the Official List

Question 3

The London Stock Exchange provides a market in a wide range of securities and other categories

What do these include?

Answer 3

UK and International Equities –
A. shares of companies from the UK or world that can be traded on LSE.
B. Investors can buy and sell ownership in these companies.

2. Debt –
   A. bonds or loans issued by companies or governments.
   B. Investors can buy these debt securities, and the issuer promises to pay back the principal + interest over time.
3. Covered Warrants –
   A. Financial instruments that give the holder the right to buy/ sell an underlying asset at a set price in the future.
   B. The “covered” part means the issuer holds the asset to back the warrant.
4. ETFs (Exchange-Traded Funds) –
   A. Like Investment baskets
   B. You buy the whole basket instead of individual stocks to track performance of an index, commodity, or asset class (like the stock market or gold).
5. Real Estate Investment Trusts (REITs) – A. Companies that own, operate, or finance income-producing real estate.
   B. Investors can invest in property via buying shares without having to directly own the property
6. Fixed Interest –
   A. Investments that pay a fixed rate of return/ money, such as bonds.

Contracts for Difference (CFDs) –
A. Financial contracts where investors can bet on prices of assets without actually owning the underlying asset.
B. They settle the difference in price of the CFD when bought/ sold.

8. Depository Receipts –
   A. Certificates issued by a bank that represent foreign stocks traded on local exchanges.
   B. They make it easier for investors to buy shares in companies from other countries.