This article examines the liquidity of the London capital markets in the decades following the liberalization of UK incorporation law. Using comprehensive stock and bond data, we calculate a measure of market liquidity for the period 1825–70. We find that stock market liquidity trended upwards but bond market liquidity did not increase over the sample period. Stock market liquidity during our sample period was partially influenced by the bond market, rather than fluctuations in economic output. In our analysis of the cross‐sectional determinants of individual stock liquidity, we find that firm size and the number of issued shares were important determinants of liquidity.  Finally, we find little evidence of an illiquidity premium, which is consistent with the view that investors did not price liquidity in this nascent market.