Forty years ago, London’s capital markets underwent a transformation which reshaped the City and redefined the way the industry functions.
The ‘Big Bang’ reforms, which came into effect on 27 October 1986, introduced a deregulation and modernisation of the London Stock Exchange and UK financial markets on a whole.
The reforms abolished fixed commissions and single-capacity rules, opened the market to foreign ownership, and replaced traditional open-outcry trading floors with electronic systems. Their legacy extends far beyond trading and remains relevant four decades later.
Reflecting on these reforms raises questions around how capital markets function today, and whether modern regulation and developments are ushering in a new era of transformation.
Distinct in recent industry debate and discourse are surges in AI, automation, tokenisation and digital assets and market structure.
So what will the next ‘Big Bang’ for capital markets look like? And are we already in the midst of a rapidly evolving trading landscape?
Looking back in retrospect
Discussions around what the Big Bang has meant for capital markets have surfaced a need to retrospectively look back on the reforms their impact and reflect on how this ties into the makeup of the industry today.
Specifically, the reforms were, as described by Gus Sekhon, head of strategy at FINBOURNE Technology, one in a series of events that continued into the 2000s, which brought consolidation, liberation of markets and helped to establish London as a centre of European finance.
“This had the effect of deregulating and freeing up industry participants from a regulatory, capital and human perspective,” Sekhon added.
“It was about removing competition and trying to invigorate the movement of capital, information and data.”
Similarly, the reforms and subsequent impacts were notable, and as Sekhon emphasises: “If you look at the history of ‘Big Bang’, the rule change itself wasn’t that significant, but when combined with the ownership change before it, the impact was huge. The banks were free to broke, deal, market make, fund manage at once.”
Specifically, a key change brought in by the regulation was the ideal of a wholesale one-stop shop investment bank – which saw technologies such as Aladdin and SimCorp aggregating their entire bodies of work within a fixed data model.
While this has since led to the evolution of new areas such as alternatives, private markets and private credit, with differentiated data, analytics and processes bolted on, these developments emphasise the important role played by the ‘Big Bang’ in catalysing a significant technology boost for capital markets.
For James Pike, chief revenue officer at Taskize, this is particularly evident, and as he asserts: “We’ve moved a long way from pit trading. Technology has played an enormous role, particularly in equities, which moved much more quickly to electronic trading than fixed income. That evolved into algorithmic and systematic trading, with increasingly large flows coming from hedge funds and other firms wanting to trade systematically.”
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He also goes on to highlight the progression to co-location, dark pools and systematic internalisers after Mifid II, which now form a key part of Europe’s trading landscape.
Building on this, the question at hand appears to be what comes next – specifically, what does the next piece of the puzzle four decades on from the ‘Big Bang’ look like.
Highlighting key innovations such as the move to the CCP and the launch of the EMCF, Rob Cranston, head of equity business development sales strategy at SIX, underlined how the ‘Big Bang’ brought in a wave of electronification of individual markets, and has since ushered in pan-European trading, standard connectivity and protocols and standardised clearing, among other innovations.
Now, the industry is looking at the next stage. “How do you look at the overall UK and European markets and broaden the opportunities for capital raising and trading?” questioned Cranston.
“I think that’s the broader story of electronification: it allowed people to automate trading and look beyond individual markets, while the electronification of clearing enabled the next stage. Now we’re asking what the next piece of that story looks like.”
The next puzzle piece?
Building on this, looking at the evolution of the industry brings to focus recent examples of innovation – and how regulation has changed over the last few years to accommodate this pace of change.
In the EU and UK, reforms – most notably Mifid and Mifid II – have brought in a wave of transformation, with efforts centred on boosting transparency, tightening investor protection, unbundling and much more.
Similarly, since the introduction of MiCA in 2023 digital assets have played a more central role in financial markets, and the launch of the UK bond consolidated tape and the EU’s equity counterpart in the last year have seen the landscape changing rapidly.
Reiterating this, Cranston affirmed: “If I’m looking at the UK in particular, the biggest changes have still come from the European regulatory framework.”
This also plays into the drive in automation and electronic trading, as previously discussed, and Cranston added: “The challenge is that as markets have become more automated and built more systems reliant on electronic trading, the ability for individual jurisdictions to introduce highly specialised or differentiated systems or regulation has actually reduced. It’s about efficiency, execution and reducing costs, which means trying to be as standardised as possible across markets.
“That’s tricky because how do you drive innovation and develop new systems and processes when you’re trying to minimise change? That’s always the trade-off, and I think in the equity market it’s a significant challenge.”
He also went on to highlight the MISP and other proposals coming through, as well as the FCA and ESMA consultations as sectors where another raft of changes will likely flow through the markets.
A self-led revolution
Arguably, the developments seen in the four decades since the ‘Big Bang’ reforms could all be classified as smaller ‘bangs’ in their own regard.
“Up until now, all of the Big Bangs and smaller bangs we’ve had have been the result of de-regulation, government initiatives, new legal interpretations or some sort of coordinated effort across regulators and the industry,” Sekhon asserts.
Yet, the modern ‘Big Bang’ is defined by advancements in areas such as AI, digital assets and extended trading hours, which is, as Sekhon describes, “a self-led revolution.”
Advancements in technology are opening up new possibilities for how markets operate, from extending trading across global time zones to rethinking the infrastructure underpinning the ownership, transfer and settlement of assets.
For Julia Hoggett, chief executive of the London Stock Exchange and head of digital and securities markets at LSEG, these developments are not simply incremental improvements to existing systems, but part of a broader evolution in how capital markets are accessed and connected.
Specifically, Hoggett draws parallels with the scale of change witnessed four decades ago, arguing that the combination of these innovations could prove transformative for markets end-to-end.
“Forty years ago, the ‘Big Bang’ transformed how markets operated. Today, innovation at the London Stock Exchange continues to put London at the forefront of evolving capital markets. The combination of 24-hour trading, tokenisation and digital market infrastructure has the potential to transform how markets operate end-to-end, from issuance and ownership through to trading, settlement and servicing.
“As with all change, it is the community that makes it work, with success dependent on adoption, regulation and maintaining the trust, resiliency and protections that underpin the markets.”
Read more – Midnight markets: Can the industry keep up with longer trading hours?
However, with change also comes complexity, and the growth of digital assets and trading hours becoming longer have seen debates arise around how these concepts will work in action.
As Cranston underlines, developments and industry response to these initiatives will continue where “there is reliable demand,” however institutional scepticism – particularly for overnight trading – is still apparent.
“Nobody in trading wants to be at their desk 24 hours a day. The question is when you reach a genuinely global investor base with enough liquidity to justify longer hours. Where there are European instruments people want to trade, though, we need to make sure they are available.”
A new AI era?
Beyond the debate around longer trading hours and digital assets, AI also represents another significant force shaping the next phase of market evolution.
Unlike previous waves of change driven by regulatory intervention or coordinated industry initiatives, its impact is already tangible across the industry, prompting a rethink of how information is organised, decisions are made and teams operate.
For some, this presents an opportunity to address long-standing inefficiencies. As Sekhon adds: “I think the AI revolution is really about accessibility and a gateway to better structural organisation inside firms. If you have the right data model in place, you can see how AI will change the way everybody works.
“That’s exciting because it will force firms to reevaluate and restructure their data architecture. Once they’ve done that, all the things I’ve previously talked about are within reach: joining up desks, operational teams and business areas, and combining their activities, risks, collateral, exposures and positions to produce real-time views of the whole organisation.”
However, for others the rise of AI and agentic technology requires a strategic balance, with the often-debated question of how the industry can maintain human expertise and touch while also leveraging AI to its most efficient capabilities coming into play.
Emphasising this, Pike adds: “The problem is that institutional knowledge is being lost. Technology has replaced people who understood why processes needed to work in certain ways, so when something fails, the checks and balances are harder to evidence.
“AI could make that worse. It will find creative ways of doing things, but that doesn’t necessarily mean they’re right, just faster and more efficient. We’re not teaching the next generation of finance professionals how things need to be done properly. They haven’t done those jobs, so they don’t know why they work the way they do. You can use technology to optimise processes, but there’s a reason most things were designed in a certain way.”
Assessing the path ahead
Ultimately, this is a concern that brings the discussion back to the central question surrounding the next ‘Big Bang’ – not simply how much technology can change, but how the industry manages that transformation.
While the original reforms fundamentally altered the structure of London’s markets, today’s developments could reshape how they operate end-to-end.
Yet, whether driven by AI, tokenisation, extending trading hours, or something else entirely, the next chapter will depend on the industry’s ability to turn technological possibility into practical progress without losing the expertise, resilience and trust on which capital markets rely.