Which company pioneered the discount brokerage model in 1975?

Charles Schwab pioneered the discount brokerage model in 1975. His firm began offering low-cost stock trades to individual investors after U.S. securities regulations opened the door to negotiated commissions.

For most of the New York Stock Exchange’s history, member brokers followed fixed commission schedules. The SEC’s May Day reforms took effect on May 1, 1975, ending mandatory fixed rates and allowing firms to compete on price. Charles Schwab & Co. responded by opening its first retail branch in Sacramento in September 1975.

A discount broker differed from a traditional full-service brokerage by emphasizing trade execution at lower prices rather than bundling in extensive advice, research and personal service. That stripped-down model made investing more accessible to smaller customers and helped create the modern retail brokerage industry.

The company was not founded from nothing in 1975. It had been incorporated as First Commander Corporation in 1971 and adopted the Charles Schwab name in 1973. Schwab’s key 1975 contribution was turning the newly permitted pricing flexibility into a consumer-facing discount brokerage business. Later telephone, automated and online services extended the same low-cost approach.