May Day

Posted in Finance, Accounting and Economics Terms, Total Reads: 2150

Definition: May Day

The date May 1, 1975. U.S. Securities and Exchange Commission deregulated the brokerage industry to allow them to charge any brokerage commission rather than a mandatory note. So, May 1, 1975 was the first day brokerages could charge any amount of commission by negotiating with their clients. Before this, commissions were fixed and high. So, the deregulation allowed market competition to state commissions.

The deregulation gave rise to brokerages that charged very low commissions and sometimes no commission at all known as no-advice accounts. Due to the rise of discount brokerages, the number of individual investors grew exponentially.

Discount brokerage has become a very competitive industry now and the commissions have dropped significantly. Traditional retail bankers have introduced free trades for their selected customers. The entry of retail banks is expected to further reduce the commission.

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