Help for Broke Brokers

Caught between steadily rising costs and an equally steady lag in investor interest, the nation's investment brokers constitute an industry that hardly anyone is bullish about. Last week the Securities and Exchange Commission sought to administer first aid in two forms. For the next six months, brokers will be able to raise their commission charges by 10% on small transactions ($100 to $5,000) and 15% on medium-size ones ($5,001 to $300,000). But after April 30, 1975, the SEC ruled, the investment industry must eliminate fixed commissions altogether, forcing brokers to compete freely with one another for investors' business.

The first step was clearly intended as a short-term transfusion for the industry, which has posted a collective loss of some $245 million so far in 1973. As a result, the fee on an investor's order to buy or sell 100 shares of a $50 stock, for example, will go up from $65 to $71.50. After the 1975 cutoff date, however, small-and medium-size investors will have some of the shopping clout now available only to those who deal in orders of $300,000 or more -mostly banks, pension funds and other institutional investors. These large-scale buyers and sellers can bargain for commissions that omit charges for services like providing research and holding stocks in custody that many investors may not want or need. When smaller investors are given the same privilege, broker commissions are expected to go down.

Wall Street brokers greeted the SEC ruling with understandable enthusiasm, since the new rate is expected to pump $150 million worth of commissions into their pockets over the six-month period. Some remain opposed to the negotiable rates later on, but a majority of security dealers have concluded that such variable charges are the only way to stimulate new investor interest. The need for new business is all too obvious. Last week the New York Stock Exchange laid off 55 employees, its third staff cutback in the past year. The word from the American Stock Exchange was almost as dreary. Because of "current business conditions in the securities industry," the exchange mailed out embarrassed notices to hundreds of previously invited guests that its annual cocktail-dinner party for the press had been canceled.

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