Big BangBig Bang
(plural big bangs)
big bang - Investment & Finance Definition
A significant change, often as a result of legal or regulatory changes. The term has acquired many different uses in the financial markets. For example, in the U.S., a Big Bang occurred in 1975 when stockbrokers stopped receiving fixed commissions, which opened the way for the first discount brokerage firms to set up business. As investment banks earned smaller trading commissions, they began to look for other ways to generate income to support trading-related services, such as research. Investment banking revenues replaced trading commissions as a way to pay for research analysts, so analysts began working more closely with each other. The Big Bang reached a crescendo during the 1990s as the stock market reached historic highs. After the stock market began to fall sharply in the first half of 2000, investigations by regulators and legal authorities put a damper on the close working relationship as they alleged conflicts of interest.
In the U.K., Big Bang refers to the deregulation of the financial markets that occurred in 1987 and 1988, when a series of reforms of the London Stock Exchange were implemented; these reforms allowed investors to trade without going through market makers, or companies that were given exclusive rights to trade stocks on the exchange. The reforms also allowed financial institutions to expand into many different areas of financial services so that customers could deal with one bank for various investment purposes instead of dealing with several. Japan experienced a Big Bang when the foreign exchange market was deregulated in 1998.