The City Revolution: Implications for Financial Markets

The combined threats posed by the proposed abolition of fixed commissions and the ending of single capacity to the existing dealing structure of the gilt market, where gilts not taken up at the public offer stage are bought back by the Bank and subsequently fed out to the market ‘on tap’ through the Government Broker1 as demand arises,2 had forced both the Stock Exchange and the Bank to consider reform at a relatively early stage in the ‘City Revolution’. Desires to allay suspicions about the level of competitiveness in gilt market-making3 and to update dealing, clearing and settlement systems, as well as market developments,4 heightened the sense of urgency.