In 1977 when broker income became strictly commissioned based, the downfall of the brokerage business began to fall.
Before 1977 brokers were respected. One needed to be over 30 years old, and was trained over two years and was salaried.
When brokers were salaried, ethics were higher in that a broker built his business on a more stable and professional premise.
Soon, when strictly commissioned based, firms began to hire youg people in mass. They would hire 10 to keep one. The training period went from 2 years to 6 months on a straight commission. Also brokers were basically formed to sell the in house product of firms.
Next comes Charles Schwab, and cuts the fat commission rates.
What cost $200 before, was now $39.
Next comes competition to Schwab, what was $39, begins to cost $19.95.
Nexts comes Direct Access, which removes the market making divisions of the discount brokerage firms. This removes the market maker spread, and high per order add ons.
Next comes the LLCs, which have now made it possible to transact at 20 cents per 100 shares.
Now comes Paulson who was CEO of a fine company which used to enjoy the previous fatter margins, who is also highly connected to the brokerage industry which in every facet of the brokerage cannot compete with the costs of the supposed rogue LLC firms whose innovations have driven down transaction costs to a level whereby it is virtually impossible for larger firms to create sizable revenues.
The rogue LLCs have made no friends who used to pull billions in revenue from this section of the brokerage business.
Now, they want it back to some degree. They want to eliminate a sector of the business with whom they cannot compete.
And unfortunately , they have the deep pockets and the political clout to move as they please.
Thus until , the LLC sector has better political and legal representation, the groups that want to keep this sector of the business will pressure to get this business back.
......................................................................................
Now look at today.....
The brokerage community paid out over $49 billion to its employees in bonuses which highly depended on the valuation of the third tier level of assets in January of 2008.
Several weeks later, most of the assets in this category were deemed valueless after bonuses were paid.
Now bonuses are being nationalized by the US Treasury which is headed by an individual who help create and market these instruments, who in turn has miilions in his own bank account in paid bonuses due to their promotion.
The LLCs and SubLLCs perhaps account for 10 to 20% of the every day volume, and because of efficiency, have established businesses which allow for professional individual trading.
Efficiency has been established at 20 cents per hundred shares, with the ability to trade with $10 per $1.
Without the LLCs, the next best rates average $5 to $10 per order....and one would have the ability to trade with $4 per $1.
That is of course unless you are a large brokerage firm , which basically can trade with any leverage it wishes, and if it gets into financial difficulties, such as a trade that was established at 30 to 1, or more....going in the wrong direction....they will be deemed too big to fail ....and will be backed by the US who is headed by a previous big brokerage CEO....
Before 1977 brokers were respected. One needed to be over 30 years old, and was trained over two years and was salaried.
When brokers were salaried, ethics were higher in that a broker built his business on a more stable and professional premise.
Soon, when strictly commissioned based, firms began to hire youg people in mass. They would hire 10 to keep one. The training period went from 2 years to 6 months on a straight commission. Also brokers were basically formed to sell the in house product of firms.
Next comes Charles Schwab, and cuts the fat commission rates.
What cost $200 before, was now $39.
Next comes competition to Schwab, what was $39, begins to cost $19.95.
Nexts comes Direct Access, which removes the market making divisions of the discount brokerage firms. This removes the market maker spread, and high per order add ons.
Next comes the LLCs, which have now made it possible to transact at 20 cents per 100 shares.
Now comes Paulson who was CEO of a fine company which used to enjoy the previous fatter margins, who is also highly connected to the brokerage industry which in every facet of the brokerage cannot compete with the costs of the supposed rogue LLC firms whose innovations have driven down transaction costs to a level whereby it is virtually impossible for larger firms to create sizable revenues.
The rogue LLCs have made no friends who used to pull billions in revenue from this section of the brokerage business.
Now, they want it back to some degree. They want to eliminate a sector of the business with whom they cannot compete.
And unfortunately , they have the deep pockets and the political clout to move as they please.
Thus until , the LLC sector has better political and legal representation, the groups that want to keep this sector of the business will pressure to get this business back.
......................................................................................
Now look at today.....
The brokerage community paid out over $49 billion to its employees in bonuses which highly depended on the valuation of the third tier level of assets in January of 2008.
Several weeks later, most of the assets in this category were deemed valueless after bonuses were paid.
Now bonuses are being nationalized by the US Treasury which is headed by an individual who help create and market these instruments, who in turn has miilions in his own bank account in paid bonuses due to their promotion.
The LLCs and SubLLCs perhaps account for 10 to 20% of the every day volume, and because of efficiency, have established businesses which allow for professional individual trading.
Efficiency has been established at 20 cents per hundred shares, with the ability to trade with $10 per $1.
Without the LLCs, the next best rates average $5 to $10 per order....and one would have the ability to trade with $4 per $1.
That is of course unless you are a large brokerage firm , which basically can trade with any leverage it wishes, and if it gets into financial difficulties, such as a trade that was established at 30 to 1, or more....going in the wrong direction....they will be deemed too big to fail ....and will be backed by the US who is headed by a previous big brokerage CEO....