Wall Street: Converging Pressures

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Giving Up $150 Million. SEC pressure last week won a much more costly concession from Wall Street. For the first time in its 176-year history, the New York Stock Exchange proposed a reduction in its sacrosanct brokerage commissions. The cuts would apply only to orders involving more than 1,000 shares of stock. Even so, Big Board President Robert W. Haack estimated that the plan would cut U.S. brokers' total commissions about $150 million annually, or 7% of the $2.1 billion they took in last year from exchange trading. As of now, the same rates (varying with the price of the security) apply to each round lot of 100 shares, no matter how large the total trade. Thus the commission for buying or selling 100 shares of stock priced at $50 is $44—and for 10,000 shares at $50 it is $4,400. Under the complex N.Y.S.E. proposal, the fee for a 10,000-share trade of a $50 stock would fall to $2,960.

By offering its own proposal, the Big Board hopes to fend off an even sharper cut in commissions proposed by the SEC, which contends that today's rate schedule is too high. The regulatory authority would cut fees on orders for more than 400 shares, starting Sept. 15. Much to Wall Street's embarrassment, the SEC has shown in a month of Washington hearings that brokers generally give up most of their commissions on big block trades. The money goes instead to other brokers, who perform unrelated services for the customer, such as research or selling mutual-fund shares. As part of its rate-cutting plan, the Big Board last week endorsed a ban on all such customer-directed fee splitting-just as the SEC has long urged.