Securities and Exchange Commission Historical Society

The Institution of Experience: Self-Regulatory Organizations in the Securities Industry, 1792-2010

Evolution of the Perfect Institution

Commission Rate Controversy

"And as the first piece of public testimony with the New York Stock Exchange, I remember asking Bob Bishop, ‘Do you have a fixed commission?'  He said, ‘Yes.'  I said, ‘Do you give it away?'  He said, ‘Yes.'  I said, ‘What's fixed about it?  You're rebating it.'"

- May 14, 2007 Interview with Eugene Rotberg

No issue called into question the effectiveness of the NYSE as a self-regulatory organization more than the persistence of the fixed minimum commission rates that had been at the heart of the NYSE's mission since the Buttonwood Agreement.

Fixed commissions supposedly kept unscrupulous competitors from undermining the market. But, in a highly structured market protected by regulation, they did little but tamp down competition, raise costs to customers, and provide additional evidence of regulatory capture. In 1965 and again in 1968, the SEC studied the matter and detailed a host of market distortions created by fixed rates, such as brokers competing on services rather than price and "give-ups" (the splitting of rates among members) endemic among institutional brokers. But nothing was done by the SEC.38

In a landmark November 1970 speech, Haack himself called for the unfixing of commission rates. It was a largely symbolic gesture since Haack's boss, chairman Bernard Lasker, was the head of a specialist firm. The NYSE continued to fend off big changes by making smaller ones, combining the offices of president and chairman, reducing the number of board members from 33 to 20, and drawing up plans to link with other exchanges through a "consolidated tape."39

By the time the consolidated tape went up in 1976, however, the unthinkable had happened. The back office crisis had convinced Congress and the SEC that only competition could provide the NYSE with the impetus required to restructure itself in order to effectively handle record high volume levels and institutional business. Beginning in 1971, the SEC imposed negotiated rates on very large trades, lowering the ceiling every year thereafter. On May 1, 1975, commission rates became fully competitive, energizing the market almost precisely as advocates had predicted that it would.40

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Related Museum Resources

Papers

1960s
document pdf (Courtesy of Eugene Rotberg)
July 7, 1967
document pdf (Courtesy of Eugene Rotberg)
September 22, 1967
document pdf (Courtesy of Eugene Rotberg)
October 3, 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 31, 1968
document pdf (Courtesy of Eugene Rotberg)
February 1, 1968
document pdf (Courtesy of Eugene Rotberg)
February 26, 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)
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 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)
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)
March 14, 1969
transcript pdf (All rights are owned exclusively by NYSE Euronext (copyright) 2010 NYSE Euronext. All Rights Reserved, courtesy New York Stock Exchange Archives. All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
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)
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)
January 15, 1974
transcript pdf (Courtesy of Harvey L. Pitt)
January 9, 1975
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
March 17, 1975
transcript pdf (Courtesy of the National Archives and Records Administration)
October 10, 1975
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 26, 1975
image pdf (All rights are owned exclusively by NYSE Euronext (copyright) 2010 NYSE Euronext. All Rights Reserved, courtesy New York Stock Exchange Archives. All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)

Oral Histories

08 May 2007

G. Bradford Cook

19 February 2009

John Liftin

14 May 2007

Eugene Rotberg

Galleries

The Bright Image: The SEC, 1961-1973
In the Midst of Revolution: The SEC, 1973-1981

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