Trading in British stocks requires a good knowledge of these securities. Find our articles dedicated to the most popular British titles.
Before you can speculate on the major British stocks, you need to know which market they are listed on and how this market works.
The reference market for British stocks is the London Stock Exchange, located in London. It is one of the oldest stock markets in the world since its origin dates back to the 17th century. Thanks to a major economic expansion, the LSE as it is most often referred to has first of all become a major financial institution in the city of London. Later, this institution will become a real reference stock market that is both solid and strictly and consistently regulated.
Until the middle of the 20th century, the Paris Stock Exchange will compete very strongly with the London Stock Exchange, but after the First World War, the London Stock Exchange became one of the most important stock exchanges in the world.
The London Stock Exchange is indeed, in terms of total market capitalization, the fourth largest stock exchange in the world and ranks just after Germany, which is third in this ranking. The top places are currently occupied by the NYSE in the United States and the Tokyo Stock Exchange in Japan. This predominance among the LSE's largest international financial centres is largely the result of its acquisition of Borsa Italiana in 2007, which made it one of the largest stock exchange groups in the world but also a particularly internationalised financial centre. Indeed, the shares of no less than 60 different countries are listed on this stock exchange, classified according to their sector of activity.
The London Stock Exchange is divided into several categories, the largest of which is the Main Market, which is the market corresponding to the Eurolist of the Euronext market. Next comes the International Market, where foreign companies are present, the Alternative Investment Market, with smaller companies, and the Domestic Equity Market.
Of course, the British stocks on which you will be able to trade through CFDs on online trading platforms or through any stock exchange investment product are all from this financial centre. It is therefore this market that you must follow to find the major stocks in this country.
To find the major British stocks for traders on the stock market, it is useless to search among the countless stocks that are listed on the London Stock Exchange. Indeed, the ideal is to focus on the stocks whose companies are included in the UK's national stock market index, namely the FTSE. Here we will learn more about this benchmark, also known as the "Footsie".
The FTSE 100 is the index of the British stock market and, as its name suggests, is composed of 100 companies listed on the London Stock Exchange chosen according to the size of their total market capitalization. The FTSE 100 is therefore referred to as a capitalization-weighted index. But FTSE is also known to be one of the largest stock market indices in the world and one of the most closely monitored by traders, since it reflects the performance of large companies in the United Kingdom, which is one of the world's largest economies.
Since the FTSE is a capitalization-weighted index of its component companies, it is important to understand how some of the stocks in it have a greater influence on its price. Indeed, the top 10 companies listed on the index alone represent no less than 40% of the total value of this index. Among the top places in this ranking are mainly companies in the energy sector such as oil and gas, such as Royal Dutsch Shell and BP. These companies therefore issue securities that should be considered as part of the major British stocks.
It should also be noted that the composition of the FTSE index changes over time. More specifically, each quarter, its component companies are valued and can be replaced. Although the FTSE 100 is the most interesting index to find the major British stocks, you can also refer to the FTSE 250 index, which is its equivalent but includes here, as its name suggests, the next 250 companies with the largest market capitalization and which are not part of the FTSE 100. Thus, when a company listed on the FTSE 250 sees its market capitalisation increase to such an extent that it exceeds that of a company listed on the FTSE 100, these two companies trade their place provided that the first directly reaches the top 90 places in the FTSE 100 ranking and the second falls to 111th place.