Matching ticket size to negotiable commission schedules

When tickets became negotiable

On May 1, 1975, fixed brokerage commissions ended and ticket rates became fully negotiable. A negotiable-commission is a brokerage ticket fee set by the firm after exchange-fixed tariffs ended, so the same order can price differently across venues.

A commission-schedule is the formula that turns share count, price, and instrument into a cash ticket charge. Implementation-cost is the cash drag of getting an order done, including commissions and related ticket fees across the order life cycle.

Lower advertised ticket rates were supported by salaried staff, the absence of advice and research overhead, and scale from specialized clearing agents.

Discount formulas were not one card

Discount commission-schedule formulas were not uniform. One type used a dollar-range fixed charge plus a percentage of trade value. Another took a percentage of former exchange fixed rates by share count. A third charged a flat 25 dollars plus 8.5 cents per share regardless of price or size. That third design is ticket-plus-per-share: a flat charge per order plus a constant amount for each share, independent of the share price.

Computed commission outlays at discounters ran 30 percent to 70 percent lower than prior full-service schedules, depending on share count, transaction value, and price per share.

The same broker was not cheapest in every band

The same broker could be cheap in one price or size band and expensive in another. Some cards added round-trip-pricing, a schedule concession that prices the exit together with the entry rather than as a second full ticket. Some cards also applied a 10 percent cut once monthly commissions exceeded 350 dollars.

Accounts around the ticket

Self-directed retirement accounts, cash, margin, and option accounts were widely available, and some discounters also paid interest on credit balances and offered limited market information previously associated with full-service firms.

Split venues and street-name inventory

Routing different orders to more than one broker could cut ticket cost. That practice is split-venue-execution: sending different size bands or instruments to different brokers because no single schedule is cheapest everywhere.

Securities held in street-name sit in the broker's name for the customer, so inventory at one firm is not automatically available at another. Street-name inventory split across accounts created a risk of selling shares from the wrong account.

Bond tickets followed a different minimum

Discount bond tickets often carried a minimum near 35 dollars, while at least one full-service bond schedule charged 10 dollars per bond with no minimum.

Editorial: instrument type belongs in the same implementation-cost reading as share count and notional, because a card that is cheap in one equity band need not be cheap in bonds.