By 1914, the London Stock Exchange listed and traded one-third of the public capital available to investors anywhere in the world. No other exchange could match it in terms of scale and scope of securities on offer, or in terms of the number of stockbrokers available to potential customers. The reason, we argue, is that the microstructure of the London Stock Exchange was also unique. The owners of the exchange (Proprietors) left governance of the exchange to the users of the exchange (Members). Because the owners of the exchange could only increase revenue by increasing the number of users, newer members constantly sought new sources of revenue through financial innovations. The evolution of the London Stock Exchange's microstructure was path-dependent – the initial conditions for membership set the separate incentives for the owners and operators of the exchange, and these determined how they responded to successive shocks over time. Path dependency, unfortunately, eventually led to decreasing effectiveness and innovation by the members over time.