Big Bang and M2: Difference between pages

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1. ''UK - London Stock Exchange.''
''Economics.''


'Big Bang' refers collectively to three major changes at the London Stock Exchange which took effect on 27 October 1986:
A broader measure of [[money supply]] which includes M1 plus short-term time deposits in banks and 24-hour money market funds.  
*The introduction of negotiated brokerage commissions, rather than the fixed commission system previously in force.
*Allowing members both to make markets and to act as brokers ('dual capacity'), rather than being restricted to one role or the other ('single capacity') as in the past.
*Widening of membership and ownership rules, allowing foreign banks to enter the market.


M2 is the measure most widely used by economists to quantify the amount of money in circulation and explain different economic monetary conditions.


There was also a significant change to introduce electronic trading, replacing the previous 'open outcry' system.
It is a key economic indicator used to forecast inflation rates.
 
 
These changes led to a period of rapid expansion, as foreseen and intended by the UK government at the time, led by Prime Minister Margaret Thatcher.
 
Some commentators link Big Bang with subsequent excessive risk taking - especially the use of bank depositors' funds for speculative activities - contributing to the conditions which led to the Global Financial Crisis of 2007/08 and onward.
 
 
2.
 
By extension, the term 'Big Bang' is also used to refer more generally to the changes in - and expansion of - financial markets in the UK (and elsewhere) in the mid-1980s.
 
 
3.
 
By analogy, similar sudden changes in - and subsequent potential expansion of - other markets are also sometimes known as 'Big Bang' events.
 
 
The rationale for adopting a 'Big Bang' approach to reforms is that sudden changes may be easier for market participants to engage with and to respond appropriately, rather than incremental changes.
 
An alternative view is that such '[[cliff edge]]' events should be avoided, preferring incremental change.
 
 
''The source of the term 'Big Bang' is in cosmology. The widely-accepted Big Bang Theory is that the universe originated from a tiny fireball which exploded with great speed and violence around 14 billion years ago, expanding and cooling to form galaxies, stars and planets.''




== See also ==
== See also ==
*[[Black Friday]]
* [[Broad money]]
*[[Black Monday]]
* [[M1]]
*[[Black Wednesday]]
* [[M3]]
*[[Broker]]
*[[Broker-dealer]]
*[[Cliff edge]]
*[[Global Financial Crisis]]
*[[Institute of Business Ethics]]
*[[London Stock Exchange]]
*[[Market maker]]
*[[Open outcry]]
*[[Thatcherism]]
 
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Financial_products_and_markets]]

Revision as of 20:21, 19 January 2014

Economics.

A broader measure of money supply which includes M1 plus short-term time deposits in banks and 24-hour money market funds.

M2 is the measure most widely used by economists to quantify the amount of money in circulation and explain different economic monetary conditions.

It is a key economic indicator used to forecast inflation rates.


See also