Sovereign states, bondholders committees, and the London Stock Exchange in the nineteenth century (1827-68): new facts and old fictions

Abstract

This paper unpacks the role of foreign bondholders committees in influencing market access following a default during the era before the creation of the British Corporation of Foreign Bondholders (CFB) in 1868. I argue that many ideas about this period need to be revisited. In particular, my evidence (which uses archival work to describe market microstructures) shows the importance of the London Stock Exchange (LSE) as a Court of Arbitration. I show how the LSE General Purpose Committee set up a system of Collective Action Clauses, requiring majority agreement among bondholders to permit market access. I argue that (unlike what research has argued thus far) this created powerful incentives for bondholders to get organized as they did. Previous models and historical ‘lessons’ need to be recast.

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