What Is May Day?
The worn out market changed forever on May 1, 1975, a date commonly referred to on Wall Street as May Day. This was the date when brokerages were fundamental allowed to set their own commission rates rather than charging a set price for stock trades.
It was the first time in 180 years that employment fees would be set by marketplace competition instead of a fixed price.
Key Takeaways
- Beginning on May 1, 1975, the SEC mandated that brokerages hand down negotiate their commissions instead of charging a fixed commission.
- The change was highly favorable to small investors and individualistic investors.
- The policy contributed to the success of discount brokers and, more recently, the introduction of commission-free stock trading at online reduction brokers.
Understanding May Day
Prior to the May Day changes, brokers charged a fixed-rate commission for all traders, regardless of the size of the trade.
That meant that modest investors paid a high percentage of their potential profits in fees and commissions, Brokers risked being sacked if they charged a lower price to any investors.
The Securities and Exchange Commission’s move to deregulate trading fees was litigious. Then-New York Stock Exchange Chair James Needham opposed changing the fee structure, citing the securities manufacture’s struggle to recover from an earnings slump. (Earlier, as a member of the Securities and Exchange Commission (SEC), he had expressed skepticism that such a go would drive brokers out of business.)
Brokers opposed the move as it would cut down on their overall commissions. Some undisturbed referred to the SEC as the Soviet Economic Committee.
May Day’s Aftermath
May Day opened the way to the creation of discount stock brokers. As commission prices knock, brokers began offering new trading services that charged lower rates but didn’t offer advice to investors.
The the universe of discount brokers gave rise to a new do-it-yourself-investor class who conducted their own research and paid lower fees for their trades.
Amidst those leading the way was Charles Schwab, who founded his namesake company in 1971. The Charles Schwab Corp. began sacrifice discounted stock trades in September of 1975. Other discount brokers followed, paving the way for the online discount brokerages we use today.
Pass Brokers
Discount brokers have flourished In the years since May Day 1975, but the number of competitors soared with the introduction of online interchange.
A retail investor can open a trading account with a dollar—although the minimum deposits vary by broker—and line of work stocks for free. Most charge small fees for transactions in other assets such as mutual funds.
Gloss over brokers don’t typically offer personal investment advice, yet many have expanded their services to offer online preparing and make financial advisors available via online chat and phone to answer investors’ questions.
Charting packages and element research are also provided by most discount brokers, although it is the job of the investor to sift through the information and make their own commerce decisions.
May Day has other meanings in other contexts:
- “Mayday” is the international voice-signal distress call for a life-threatening emergency, coined in 1921 at a London airport with much French above for its similarity to the French phrase m’aider (translation: help me).
- May Day, or May 1, is International Workers’ Day, a holiday celebrating laborers that is officially monitored in many countries. (The U.S. instead celebrates Labor Day on the first Monday of September.)
May Day has other meanings in other contexts:
- “Mayday” is the international voice-signal distress call for a life-threatening emergency, coined in 1921 at a London airport with much French above for its similarity to the French phrase m’aider (translation: help me).
- May Day, or May 1, is International Workers’ Day, a holiday celebrating laborers that is officially monitored in many countries. (The U.S. instead celebrates Labor Day on the first Monday of September.)
Examples of Commission Structures Following May Day
Commission-free merchandising of stocks became common around 2019, as online brokers entered a price war amid stiff competition. At minuscule 10 online brokers now offer commission-free stock trades.
Most have some limits to that stock, and many charge a commission on trades of some assets such as mutual funds and options. They also volunteer premium services for a fee.
Anyone signing up for a new service should check for hidden fees. Stock trades may be free but there puissance be, for example, an inactivity fee, charged if a client doesn’t make any trades within a specified time frame.
Most deduction brokers provide a trading platform, charting functionality, fundamental research, news, and online help. Before opting a broker, look for a demo account to assess the functionality and any costs of trading.