Securities and Exchange Commission Historical Society

The Bright Image: The SEC, 1961-1973

An Economic Theory of Regulation Emerges

Fixed Commission Rates and Give-Ups

While Cohen pushed for changes in the fixed commission rates, the Commission was reluctant to impose rule changes unilaterally on the New York Stock Exchange. But, on the issue of give-ups, which was a device by which an institutional investor dealing in large volume purchases could receive an indirect volume discount, the Commission was more successful. The new emphasis on the economic basis and impact of regulation was central to the SEC concern about give-ups. By 1966, the SEC concluded that the practice of give-ups "has developed to a point where it threatens the integrity of wide segments of the securities industry."(21)

Initially, Cohen relied on the cooperative approach with the NYSE. He corresponded and cajoled the NYSE to make internal changes. When the NYSE appeared reluctant, the Commission, relying on Eugene Rotberg's analysis, drafted Rule 10b-10, which would have prohibited give-ups entirely and submitted the rule for public comment.

Cohen implemented an integrated SEC regulatory approach that he believed would be more effective than a series of unpredictable and possibly unrelated court decisions. Despite some initial recalcitrance, as the SEC moved closer toward commission-rate hearings, the NYSE governing board moved toward abolishing give-ups by December 1968.

The SEC analysis of the economic consequences of proposed regulation, and the emergence of an economic theory of regulation, came to fruition in the commission rate hearings during the last year of Cohen's term. The NYSE and the SEC produced dueling documents over the economic implications of commission rate regulation.

During the SEC hearings, NYSE Vice President Robert Bishop was unable to explain why the rate structure charged varying commissions on stocks of different value, despite the fact that there was no greater work in executing either trade. Furthermore, fixed commission rates unrelated to the economic costs of the trades had resulted in a six-fold increase in brokerage income from 1961-1968.

The rate structure, argued the SEC, shielded NYSE members from the rigors of competition and led to inefficiencies in the market and increased costs to investors. By January 1969, the NYSE acknowledged that their fixed commission rate structure was antiquated and needing reform, and within a year, had begun to reform its commission rates along the lines suggested by the SEC.

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Footnotes:

(21) Seligman, Transformation, 399.


Related Museum Resources

Papers

May 19, 1964
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
September 24, 1964
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
November 24, 1965
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
November 30, 1965
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
March 10, 1967
transcript pdf (Government Records)
April 21, 1967
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
May 12 ,1967
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
May 19, 1967
document pdf (Courtesy of Eugene Rotberg)
November 20, 1967
document pdf (Courtesy of Eugene Rotberg)
January 29, 1968
document pdf (Courtesy of Eugene Rotberg)
January 29, 1968
document pdf (Courtesy of Eugene Rotberg)
January 29, 1968
document pdf (Courtesy of Eugene Rotberg)
January 30, 1968
document pdf (Courtesy of Eugene Rotberg)
January 31, 1968
document pdf (Courtesy of Eugene Rotberg)
January 31, 1968
document pdf (Courtesy of Eugene Rotberg)
January 31, 1968
document pdf (Courtesy of Eugene Rotberg)
February 1, 1968
document pdf (Courtesy of Eugene Rotberg)
February 1, 1968
document pdf (Courtesy of Eugene Rotberg)
February 1, 1968
document pdf (Courtesy of Eugene Rotberg)
February 1, 1968
document pdf (Courtesy of Eugene Rotberg)
February 2, 1968
document pdf (Courtesy of Eugene Rotberg)
February 3, 1968
document pdf (Courtesy of Eugene Rotberg)
February 5, 1968
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
February 6, 1968
document pdf (Courtesy of Eugene Rotberg)
February 7, 1968
document pdf (Courtesy of Eugene Rotberg)
February 8, 1968
document pdf (Courtesy of Eugene Rotberg)
February 15, 1968
document pdf (Courtesy of Eugene Rotberg)
February 15, 1968
document pdf (Courtesy of Eugene Rotberg)
February 15, 1968
document pdf (Courtesy of Eugene Rotberg)
February 15, 1968
document pdf (Courtesy of Eugene Rotberg)
February 19, 1968
document pdf (Courtesy of Eugene Rotberg)
February 19, 1968
document pdf (Courtesy of Eugene Rotberg)
February 20, 1968
document pdf (Courtesy of Eugene Rotberg)
February 20, 1968
document pdf (Courtesy of Eugene Rotberg)
February 21, 1968
document pdf (Courtesy of Eugene Rotberg)
February 21, 1968
document pdf (Courtesy of Eugene Rotberg)
February 21, 1968
document pdf (Courtesy of Eugene Rotberg)
February 21, 1968
document pdf (Courtesy of Eugene Rotberg)
February 21, 1968
document pdf (Courtesy of Eugene Rotberg)
February 22, 1968
document pdf (Courtesy of Eugene Rotberg)
February 23, 1968
document pdf (Courtesy of Eugene Rotberg)
February 23, 1968
document pdf (Courtesy of Eugene Rotberg)
February 23, 1968
document pdf (Courtesy of Eugene Rotberg)
February 23, 1968
document pdf (Courtesy of Eugene Rotberg)
February 23, 1968
document pdf (Courtesy of Eugene Rotberg)
February 26, 1968
document pdf (Courtesy of Eugene Rotberg)
February 26, 1968
document pdf (Courtesy of Eugene Rotberg)
February 27, 1968
document pdf (Courtesy of Eugene Rotberg)
February 27, 1968
document pdf (Courtesy of Eugene Rotberg)
February 27, 1968
document pdf (Courtesy of Eugene Rotberg)
February 28, 1968
document pdf (Courtesy of Eugene Rotberg)
February 28, 1968
document pdf (Courtesy of Eugene Rotberg)
February 28, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
February 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 1, 1968
document pdf (Courtesy of Eugene Rotberg)
March 1, 1968
document pdf (Courtesy of Eugene Rotberg)
March 4, 1968
document pdf (Courtesy of Eugene Rotberg)
March 4, 1968
document pdf (Courtesy of Eugene Rotberg)
March 4, 1968
document pdf (Courtesy of Eugene Rotberg)
March 7, 1968
document pdf (Courtesy of Eugene Rotberg)
March 7, 1968
document pdf (Courtesy of Eugene Rotberg)
March 7, 1968
document pdf (Courtesy of Eugene Rotberg)
March 7, 1968
document pdf (Courtesy of Eugene Rotberg)
March 8, 1968
document pdf (Courtesy of Eugene Rotberg)
March 8, 1968
document pdf (Courtesy of Eugene Rotberg)
March 8, 1968
document pdf (Courtesy of Eugene Rotberg)
March 8, 1968
document pdf (Courtesy of Eugene Rotberg)
March 9, 1968
document pdf (Courtesy of Eugene Rotberg)
March 11, 1968
document pdf (Courtesy of Eugene Rotberg)
March 11, 1968
document pdf (Courtesy of Eugene Rotberg)
March 12, 1968
document pdf (Courtesy of Eugene Rotberg)
March 12, 1968
document pdf (Courtesy of Eugene Rotberg)
March 12, 1968
document pdf (Courtesy of Eugene Rotberg)
March 13, 1968
document pdf (Courtesy of Eugene Rotberg)
March 14, 1968
document pdf (Courtesy of Eugene Rotberg)
March 14, 1968
document pdf (Courtesy of Eugene Rotberg)
March 14, 1968
document pdf (Courtesy of Eugene Rotberg)
March 14, 1968
document pdf (Courtesy of Eugene Rotberg)
March 15, 1968
document pdf (Courtesy of Eugene Rotberg)
March 18, 1968
document pdf (Courtesy of Eugene Rotberg)
March 19, 1968
document pdf (Courtesy of Eugene Rotberg)
March 19, 1968
document pdf (Courtesy of Eugene Rotberg)
March 19, 1968
document pdf (Courtesy of Eugene Rotberg)
March 19, 1968
document pdf (Courtesy of Eugene Rotberg)
March 20, 1968
document pdf (Courtesy of Eugene Rotberg)
March 21, 1968
document pdf (Courtesy of Eugene Rotberg)
March 21, 1968
document pdf (Courtesy of Eugene Rotberg)
March 22, 1968
document pdf (Courtesy of Eugene Rotberg)
March 25, 1968
document pdf (Courtesy of Eugene Rotberg)
March 25, 1968
document pdf (Courtesy of Eugene Rotberg)
March 26, 1968
document pdf (Courtesy of Eugene Rotberg)
March 26, 1968
document pdf (Courtesy of Eugene Rotberg)
March 26, 1968
document pdf (Courtesy of Eugene Rotberg)
March 26, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 27, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 28, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
March 29, 1968
document pdf (Courtesy of Eugene Rotberg)
April 1, 1968
document pdf (Courtesy of Eugene Rotberg)
April 1, 1968
document pdf (Courtesy of Eugene Rotberg)
April 1, 1968
document pdf (Courtesy of Eugene Rotberg)
April 1, 1968
document pdf (Courtesy of Eugene Rotberg)
April 1, 1968
document pdf (Courtesy of Eugene Rotberg)
April 3, 1968
document pdf (Courtesy of Eugene Rotberg)
April 3, 1968
document pdf (Courtesy of Eugene Rotberg)
April 8, 1968
document pdf (Courtesy of Eugene Rotberg)
April 15, 1968
document pdf (Courtesy of Eugene Rotberg)
April 18, 1968
document pdf (Courtesy of Eugene Rotberg)
April 19, 1968
document pdf (Courtesy of Eugene Rotberg)
May 9, 1968
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
May 28, 1968
document pdf (Courtesy of Eugene Rotberg)
July 1, 1968
document pdf (Courtesy of Eugene Rotberg)
July 1, 1968
document pdf (Courtesy of Eugene Rotberg)
August 8, 1968
document pdf (Courtesy of Eugene Rotberg)
August 13, 1968
document pdf (Courtesy of Eugene Rotberg)
August 14, 1968
document pdf (Courtesy of Eugene Rotberg)
August 15, 1968
document pdf (Courtesy of Eugene Rotberg)
August 16, 1968
document pdf (Courtesy of Eugene Rotberg)
August 19, 1968
document pdf (Courtesy of Eugene Rotberg)
August 19, 1968
document pdf (Courtesy of Eugene Rotberg)
August 19, 1968
document pdf (Courtesy of Eugene Rotberg)
August 19, 1968
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
August 20, 1968
document pdf (Courtesy of Eugene Rotberg)
August 20, 1968
document pdf (Courtesy of Eugene Rotberg)
August 20, 1968
document pdf (Courtesy of Eugene Rotberg)
August 21, 1968
transcript pdf (Courtesy of New York Stock Exchange Archives)
August 21, 1968
document pdf (Courtesy of Eugene Rotberg)
August 22, 1968
document pdf (Courtesy of Eugene Rotberg)
August 23, 1968
document pdf (Courtesy of Eugene Rotberg)
October 9, 1968
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
October 22, 1968
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
November 19, 1968
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
December 10, 1968
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
December 12, 1968
document pdf (Courtesy of Eugene Rotberg)
January 22, 1969
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
March 6, 1969
image pdf (Courtesy of the Library of Congress)
September 28, 1970
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
November 17, 1970
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
1971
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
January 6, 1971
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
July 9, 1971
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
August 5, 1971
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
August 6, 1971
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
April 20, 1972
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
June 16, 1972
transcript pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)

Photos

1972

Karl Stewart, Richard Nesson and Mario Mirabelli

(Courtesy of Richard Nesson )

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