British Capital Market and International investment Networks

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It is this inquiry's aim to analyze the formation of the international investment networks, from the view of the correspondent relations which the London Stock Exchange members had formed for the arbitrage business, in the British capital market since 1815. We can get the following features.Firstly, the formation process is divided into two phases.(1) Before 1850s ; As the volume of the international security was small and the communication was less developed, arbitrage had little scope to expand. Also, as the volatility of overseas investment was very high, there were few members who specialized in trading overseas securities.(2) Since 1850s ; The volume of the international security had increased extensively, and government and railway stocks, and the issues of mining and big industrial companies were listed in more than one big financial center. As the international cable networks had been established increasingly since 1850s, arbitrage had expanded and the price difference between two exchanges had been too narrowed.Secondly, because the complexity of arbitrage had increased and it costed much money and time, the member firms which undertook it were so little, only 87. The proportion was only more than 10% of all member firms early in the 20th century. While it was only 7 firms that had more than 10 correspondents, 42 had only one. There were some cases where even a firm, which had only one correspondent, did a great business in their specialized area. The correspondent relations focused mainly on big financial centers of Europe, London and North America, but global one was little. The relations to Australia and South Africa were considerable, and the former's arbitrage was on government stocks and mining shares, the latter's on gold mining shares.