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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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Footnotes:
(38.) November 20, 1967 Memorandum on Give-Ups: Alternative Courses of Action, from Irving M. Pollack, SEC Division of Trading and Markets, with Attachments: a) Practices and Procedures of Mutual Funds in Allocating Brokerage—a basis for enforcement proceedings, and b) Selection of an Appropriate Respondent; July 1, 1968 Opening Statement of Eugene H. Rotberg at Public Investigatory Hearing on Commission Rate Structure
(39.) November 17, 1970 "Competition and the Future of the New York Stock Exchange" - Remarks of Robert W. Haack, New York Stock Exchange at the Economic Club of New York; January 15, 1974 "The Consolidated Tape: A Perspective," Speech by SEC Chairman Ray Garrett, Jr. to the National Association of Securities Dealers
(40.) May 15, 1975 "The New Breath of Competition" - Remarks by SEC Commissioner A.A. Sommer, Jr. to the Seminar on the Analysis of Securities Prices
Related Museum Resources
Papers
- 1960s
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document
pdf
(Courtesy of Eugene Rotberg)
- July 7, 1967
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document
pdf
(Courtesy of Eugene Rotberg)
- September 22, 1967
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document
pdf
(Courtesy of Eugene Rotberg)
- October 3, 1967
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document
pdf
(Courtesy of Eugene Rotberg)
- November 20, 1967
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document
pdf
(Courtesy of Eugene Rotberg)
- January 29, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- January 31, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- February 1, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- February 26, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- March 29, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- April 1, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- July 1, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- July 1, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- August 8, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- August 13, 1968
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document
pdf
(Courtesy of Eugene Rotberg)
- August 19, 1968
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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
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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
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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
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image
pdf
(All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
- 1971
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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
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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
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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
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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
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transcript
pdf
(Courtesy of Harvey L. Pitt)
- January 9, 1975
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transcript
pdf
(Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
- March 17, 1975
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transcript
pdf
(Courtesy of the National Archives and Records Administration)
- October 10, 1975
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image
pdf
(Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
- November 26, 1975
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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
With Dr. Kenneth Durr
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19 February 2009
John Liftin
With Dr. Kenneth Durr
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14 May 2007
Eugene Rotberg
With Dr. Kenneth Durr
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Galleries
- The Bright Image: The SEC, 1961-1973
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- In the Midst of Revolution: The SEC, 1973-1981
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