Finance History | Charles Schwab — First Commander Written in San Francisco, Then May Day
· 1971-4
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Finance History | Charles Schwab — First Commander Written in San Francisco, Then May Day
kevin
People treat Charles Schwab as a Westlake, Texas listing that always ran a zero-commission app from an S and P 500 book.
The first book was a San Francisco newsletter shop.
In April 1971 the firm incorporated in California as First Commander Corporation, a subsidiary set up to sell traditional brokerage and to publish the investment letter Charles R. Schwab had been writing since the 1960s.
The letter had reached about 3,000 subscribers.
Partners left.
Schwab bought them out, carried six-figure debt, and in 1973 put his own name on the door as Charles Schwab and Co.
The mechanism arrived two years later.
On 1 May 1975, remembered on the Street as May Day, the Securities Acts Amendments ended the New York Stock Exchange's fixed minimum commission.
Member firms could charge what they liked.
Most of the old wire houses kept the high ticket and warned that a cheaper trade would wreck research.
Schwab cut the price, opened a Sacramento branch that September, and put a toll-free desk on the phone so a household could place an order without a commissioned salesman.
Fifty trades a day, written on paper, was the early pace the firm later cited.
Automation followed because a discount book only works if the back office is cheap.
Bank of America bought the company in 1983 after a failed IPO, then sold it back.
The long headquarters that visitors still photograph is 211 Main Street, the Charles Schwab Building on Rincon Hill, occupied decades after the newsletter desk.
The Texas holding company is later still.
May Day is the date that made the 1971 incorporation matter.
A fixed commission had been a floor under every Big Board name.
Once the floor came out, a San Francisco shop could sell execution without selling advice, which is the split the retail brokerage industry still lives on.
Photo: San Francisco Financial District, the city of the 1971 incorporation, via Wikimedia Commons.
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