The Unseen Wall Street of 1969-1975: And Its Significance for Today

By Alec Benn | Go to book overview

14
How NYSE Commissions, Traditionally Fixed and High, Became Competitive and Low, Despite the Opposition of Most Members of The New York Stock Exchange

A few days after Bob Haack made his shattering speech before the Economics Club on November 17, 1970, proposing among other reforms that negotiated commission rates be considered, Chairman Bunny Lasker had hurried down to Washington to counter-attack. Bunny wanted to preserve as long as he could the tradition that all brokers charged investors the same commissions -- a practice that had existed ever since The New York Stock Exchange was founded in 1792.

In dealing with the SEC commissioners, Bunny 1 copied the tactics made famous by the Roman general Fabius Maximus in successfully defending Rome: delay, delay, delay.

This was a departure from the adamant stand Gus Levy, then supported by Bob Haack, had made when the SEC suggested in 1968 that commission rates be competitive. In so doing, The New York Stock Exchange officially made several dire prognostications2 that have proven to be wrong. The Exchange had stated making commission rates competitive would result in withdrawal of members from the Exchange, less accurate price information, less liquidity and depth, and weakened regulatory functions. At that time, Bob Haack had teamed with Gus in defense of fixed rates.

However, it had become obvious by then that if fixed rates continued, the rates would have to be revised. The huge increase in the size of institutional orders had not been envisioned when the last revisions were made in 1959. So Gus and Bob preserved the principle of fixed rates by agreeing to a very small reduction in commissions on some orders of 1,000 shares or more.3

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