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The Globe and Mail

Big Bang's legacy as U.K. watershed moment contested

The sun rises behind the Canary Wharf skyscrapers on the Isle of Dogs on October 24, 2011 in London, England. The Canary Wharf financial district, which was constructed in the 1980s on the site of the derelict West India Docks, is home to the headquarters of numerous banks and financial institutions.

Oli Scarff/Oli Scarff/Getty Images

Twenty-five years on from Big Bang and there are very few people -- mostly men -- left in the City of London to talk about it, and even fewer who would still identify it as the watershed event of their careers.

With anti-capitalism protesters massed in a tent city on the steps of St. Paul's Cathedral, and European leaders meeting in Brussels to thrash out a solution to a spiralling sovereign debt crisis, the City is gripped by a very different revolutionary spirit than it was on October 27, 1986.

When Big Bang broke open the clubby world of the Square Mile by eliminating its most restrictive practices and allowing foreign competitors into the market, London was already on its way to becoming one of the world's leading international financial centres.

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Its biggest challenge now, senior financiers say, is maintaining that position amid increased competition from emerging markets, across an industry that was severely weakened - both operationally and reputationally - by the financial crisis.

David Mayhew, the chairman of JPMorgan Cazenove and one of the few elder statesman to have remained at the same firm over a transformational two and a half decades, notes with a smile that 1986 marked "only the midway point of my career in the City."

"I don't think this thing was planned the way it looks now like it was planned," he says. "I don't think you should look at Big Bang as anything other than a stepping stone to all the changes that have taken place since." If anything he says, the abolition of foreign exchange controls in 1979 was more pivotal in transforming London from an insular market into an international one.

Nonetheless October 27, 1986 is widely hailed as the moment that the City was released from the rules on single capacity that had kept "jobbers," who made markets in shares, brokers, who traded shares on behalf of investors, and merchant bankers in separate firms.

The London Stock Exchange was opened up to more competition and new entrants, notably from overseas firms, and City partnerships and firms were granted access to levels of capital they had not seen before. For the first time conglomerates existed that could be agent and principal in issuing, distributing and making markets in securities.

Most of the advertisers that filled the Financial Times special edition on the day - Sheppards, Midland Bank Group, SG Warburg, Robert Fleming Securities, Kleinwort Grieveson, Hoare Govett - have since disbanded or were swallowed up by other firms in the ensuing land grab.

An ad for Canary Wharf, then still just a model in a developers' office, proclaimed that the Docklands business district would "feel like Venice and work like New York."

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The roots of Big Bang actually go back to 1979, when the Office of Fair Trading decided to look at the Stock Exchange's rule book which appeared to be operating on a basis of more than 300 restrictive practices.

In 1983, the government agreed to abandon its legal case in the restrictive practices court if the stock exchange, then a membership club, agreed to open up. The exchange also agreed to abolish in October 1986 the fixed commissions that were seen as the essential prop to the system of single capacity.

Twenty-five years later, however, the legacy of Big Bang remains contested. To some, it was the end of an era of "my word is my bond" and marked the start of a new era of City excess.

"It is clear that that personal responsibility is the underpin of faith in the system, and the challenge is to bring that to the fore again," said Chris Cummings, chief executive of lobby group TheCityUK.

Mr. Mayhew, however, dismisses suggestions that Big Bang - or the long-term structural and technological changes that emanated from it - helped to sew seeds of the recent financial crisis.

"Without Big Bang we wouldn't have the scale of financial services in this country. I wonder, however, whether central bankers and the regulators were really on top of the interconnectedness of the world."

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