Jobber: Definition, Role, and Historical Significance of Stockjobbing

A comprehensive look at the jobber, a market maker on the London Stock Exchange prior to the mid-1980s, including its definition, role, historical context, and evolution.

What is a Jobber?

A “jobber,” also known as a “stockjobber,” refers to a market maker on the London Stock Exchange (LSE) who facilitated trading by buying and selling securities. Before the mid-1980s, jobbers played a crucial role in maintaining liquidity in the market by standing ready to trade stocks both for their own accounts and for other market participants.

Functions of a Jobber

• Liquidity Provider: Jobbers ensured high market liquidity by being able to buy and sell at any given time.
• Price Maker: They contributed to price discovery by quoting both bid and ask prices.
• Risk Bearer: Jobbers took on significant risk by holding inventories of stocks, aiming to profit from the spread between the buying and selling prices.

The History of Stockjobbing

Evolution of Jobbers

Origins in the 17th Century

The term “stockjobbing” has its roots in the early development of the LSE in the 17th century. Initially, stock trading took place in coffee houses, where jobbers facilitated transactions among merchants.

Institutionalization in the 18th Century

By the 18th century, jobbers became more formalized entities. The LSE adopted a structured system where jobbers operated as middlemen between brokers and the exchange.

Decline in the 20th Century

The role of jobbers remained pivotal until the 1986 “Big Bang” deregulation of the LSE, which eliminated jobbers by allowing brokers to also act as dealers. This blurred the lines between roles and moved towards a market-driven by electronic trading.

Role of Jobbers in Modern Financial Systems

Although the title “jobber” is now obsolete, the functions they performed have shifted to modern market makers who work within various stock exchanges globally. The legacy of jobbers persists in the efficient functioning of today’s financial markets.

Comparisons

Jobbers vs. Brokers

• Jobbers: Traded stock for their own account, acting as principal.
• Brokers: Acted on behalf of clients, executing trades as agents.

Jobbers vs. Modern Market Makers

• Jobbers: Operated on a purely physical trading floor.
• Market Makers: Utilize advanced algorithms and technology to facilitate trading electronically.

FAQs

What led to the decline of jobbers?

The “Big Bang” deregulation of the LSE in 1986 allowed brokers to act as dealers, ultimately blending traditional roles and making jobbers redundant.

How did jobbers impact the stock market?

Jobbers played a vital role in maintaining market fluidity and ensuring transactions could occur quickly and efficiently.

Are jobbers still present in modern financial markets?

The exact role of jobbers no longer exists, but their functions have been integrated into the responsibilities of modern market makers.

References

1. “History of the London Stock Exchange.” London Stock Exchange.
2. Michie, R.C. (1999). “The London Stock Exchange: A History.”

Summary

The jobber played an indispensable role in the history of the London Stock Exchange by providing liquidity, risk-bearing, and price-setting functions. Though the traditional role no longer exists post the 1986 deregulation, the essence of jobbing continues in the frameworks of modern financial markets through electronically driven market makers. Understanding the evolution of jobbers offers valuable insights into the development and functioning of contemporary stock markets.