Stock Exhange Commissions

Commissions are charged by all stock exchanges for each transaction. The rates are among the lowest for the transfer of any property and represent a payment for a service-the purchase or the sale, as the case may be. Since the commissions charged by the NYSE set the pattern and are, to a very considerable extent, used with some modification by other exchanges, they are presented below. The basic transaction is the "round lot," which, for the majority of stocks, is 100 shares; the commission itself is figured as a flat charge plus a percentage of the cost as shown in the following schedule:

Suppose a customer of a NYSE firm buys 100 shares of a stock at $18.75 per share, a total of $1875. Commission is 1%, or $18.75, plus $7, total $25.75.
Suppose 100 shares are bought at $24.50 per share; commission is 2 per cent, or $12.25, plus $19, or $31.25.

For the investor of small means it would be very instructive to compute commissions on somewhat smaller sales, especially those involving the odd lot since he would, in most cases, be buying less than 100 shares.
Suppose he buys or sells 20 shares at $13.75; his total amount is $275; since this is not a round lot, he is charged full-lot commission less $2; hence he will pay 2 per cent plus $3 or $8.50 less $2 or $6.50.

Suppose he buys or sells 10 shares at $35, with a total amount of $350; he will be charged 2 per cent plus $3, or $10.00 minus $2 for the odd lot or $8.00.

Suppose he buys or sells 10 shares at $18, with a total amount $180; he will pay the minimum of $6, since lots above $100 carry a fee of no less than $6 minimum.

It must now have become obvious that the commission rates are not excessive, but that it would pay, in the long run, to make one's transactions in the range of at least $250, since one has to pay the minimum $6 commission, which represents only about 22 per cent of the sales amount, on any sale between $100 and $250 anyway. It is easy to see that this $250 can be made up by 25 shares at $10, 10 shares at $25, etc.

In addition to the regular commission charged by the Exchange, there are certain state and Federal transfer taxes; these range from 1 to 6 cents per share and are paid only by the seller. The total of such a tax on a single transaction is quite small.