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Negotiated Brokerage Commissions and the Individual Investor

Published online by Cambridge University Press:  06 April 2009

Gerald A. Blum  and
Wilbur G. Lewellen
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Extract

The elimination in 1975 of fixed minimum brokerage commission rates for agency transactions in equity securities was one of the more highly publicized events in the still-ongoing process of the deregulation of American financial markets. While, prior to that time, commission rates on large stock transactions—that were executed primarily for institutions—had become increasingly subject to negotiation, individual investors effectively faced an industry-wide fixed price schedule for the vast majority of their transactions. At the insistence of the Securities and Exchange Commission, the privilege of negotiation on commission rates was extended to securities trades of all sizes as of May 1, 1975, a date the brokerage industry only half-humorously dubbed “Mayday”.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 18 , Issue 3 , September 1983 , pp. 331 - 343
Copyright
Copyright © School of Business Administration, University of Washington 1983

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