Andrew Cave says that the restrictive practices and outdated working practices of the London Stock Exchange pre-1986 have a parallel in Lloyd's circa 2006

Amid all the backslapping and celebrations for the twentieth anniversary of Big Bang a few weeks ago, Sir Nicholas Goodison, the London Stock Exchange chairman who helped usher in the transformation of the London market, started an ominous debate.

Looking at the wider London financial community today, stretching from what is still quaintly called the Square Mile to Canary Wharf in the east and the hedge fund community in St James's in the west, what element of the City was in need of transforming these days, he asked.

It's quite a question, particularly as the hyperbole that accompanied the Big Bang anniversary makes the way things were prior to October 27, 1986 sound like a tired old gentleman's club that started work late, enjoyed splendid lunches and then knocked off at tea time.

Petty demarcation lines were everywhere. Brokers weren't allowed to make markets; jobbers weren't allowed to have corporate clients. Merchant bankers weren't meant to do either.

The market was starved of external capital. Few there today think it could have survived had these restrictive practices not been lifted.

Is there a parallel in today's City?

Sir Nicholas thought life assurance companies might be one with their system of commissions, potential conflicts of interest and the government-imposed rules surrounding annuities that effectively hold back the life and pensions industry.

However, an even more intriguing answer came over the wine and canapés when a leading City figure asked a mover and shaker in the government the same question. Unquestionably, it had to be Lloyd's, he replied.

Even the most hardened fan of Lloyd's reforming credentials would have to agree that there are some similarities.

Both markets can date their history back more than 300 years to their earliest roots in London coffee houses. Both have put London firmly on the map as an international marketplace and both have had their share of competitive threats.

For the Deutsche Börse in Frankfurt, read the growing band of commercial insurers enjoying the lower-cost sunshine in Bermuda.

The key difference is that Lloyd's never had its own Big Bang, though the events that led to reconstruction and renewal 10 years ago probably felt explosive enough.

Lloyd's has earned a nickname as the great survivor, weathering 9/11 plus two recent years of hurricane losses in recent times.

Yet, the market, along with the New York Stock Exchange, is still one of the last surviving major examples of face-to-face trading. Despite the fiasco that was Kinnect or perhaps because of it, the market is still largely stuck in the pre-electronic age.

Brokers wander around with huge piles of paper and every year, the equivalent of two jumbo jets worth of documentation travels between Lime Street and Lloyd's back offices in Chatham and Folkestone.

Let's see: costs that are 6% higher than its fiercest competitor, rigid separation between brokers and underwriters, starkly inefficient trading systems and a seeming resistance to change that threatens London's pre-eminence in a key financial market.

Close your eyes and think about it. Am I talking about Threadneedle Street pre-1986 or Lime Street circa 2006?

The stock market's transformation is testament to the immutable rule of markets - that capital will flow to the most efficient provider.

Unless the rule has been abolished without anyone noticing, Lloyd's would do well to take note and ask the market what anniversary it wants to be commemorating in another 20 years' time. IT

Andrew Cave is the former associate City editor of the Daily Telegraph