The spectre of rising unemployment stalking the City struck at its very heart today as the London Stock Exchange said it is making job cuts, hitting one in eight of its staff, or 133 people.

The staff were on average paid more than £80,000 a year, and will get pay-off cheques of more than £100,000. Half the jobs are going at the Stock Exchange's Paternoster Square headquarters with the rest going at its Borsa Italia sister exchange in Milan.

The redundancies include Martin Graham, the much-respected head of the LSE's AIM market, whose shock departure was revealed in the summer. Graham is the most senior staffer to have been cut.

It is understood most of the jobs are in the Stock Exchange's marketing department and in its secondary markets function, which manages the relationships between the LSE and its major users, the big international securities and broking houses.

The extent of the job cuts was revealed as the LSE reported a 43% slump in the average daily value traded on its Sets electronic stock trading platform. That daily value fell to an average of £4.6 billion over the five months to the end of August.

While the flotation has all but disappeared from the stock market, recession-hit companies have bombarded the City with fund-raising rights issues and share placings.

These secondary issues enabled the LSE to report that the amount of money raised on its markets through the spring and summer came in at £43 billion, in line with the same period last year.

The LSE's new chief executive, Xavier Rolet, conceded: “Market conditions remain challenging.”