Investment in London-The London stock exchange

A stock exchange, also known as stock market or equity market, is a public entity, not necessarily a physical or discrete entity, but a loose network of economic transactions, for the trading of company stocks (shares), bonds and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.

The size of the world stock market was estimated at about $36.6 trillion at the beginning of October 2008.The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. Considering that the value of the derivatives market is stated in terms of notional values, it cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

The London Stock Exchange is a stock exchange located in the City of London in the United Kingdom. As of December 2011, the Exchange had a market capitalisation of US$3.266 trillion (short scale) making it is the third largest stock exchange in the world by this measurement (and the largest in Europe). The Exchange was founded in 1801 and its current premises are situated in Paternoster Square, close to St Paul’s Cathedral in the City of London. The Exchange is part of the London stock exchange. The FTSE 100 Index is an average of the London stock exchange prices of the stocks of the 100 largest British companies, published daily. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organisation specialised in the business of bringing buyers and sellers of the organisations to a listing of stocks and securities together.

Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations trading in their own shares. Some studies have suggested that institutional investors and corporations trading in their own shares generally receive higher risk-adjusted returns than retail investors

Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-first-served basis, if there are multiple bidders or askers at a given price.