Peace with New York, War with Washington

Wall Street fairly shuddered two years ago when Mayor John Lindsay urged a 50% increase in New York's stock-transfer tax. Brokers protested that the tax was already unfair to out-of-state investors, who account for 70% of the New York Stock Exchange's $130 billion annual business. Warning that any increase would be "misguided, shortsighted and self-defeating," the Big Board dropped plans to build a new $80 million headquarters in Manhattan, threatened to move lock, stock and trading booths out of the state.

Though Lindsay's proposed increase was later trimmed to 25% in the state legislature, the Big Board was ready to make up with the Big Town only last week. Following legislation of a tax compromise, Exchange President Robert Haack announced that a search for a new site in Manhattan was being "expedited." Under the new measure, New Yorkers will continue to pay the current tax--1 1/2 to 5 a share, depending on share prices--but out-ot-state stock sellers can look forward to a 50% cut in the tax over a five-year period beginning in mid-1969. The new law also scraps a rising tax rate on big sales in favor of a flat $350 tax on those of 7,000 shares or more.

Cost of the Contretemps. If the recent surge in market trading continues, the city will lose little if any stock-transfer tax revenue, which has grown from $166 million in fiscal 1967 to $242 million this year. For the Big Board, the cost of the contretemps may be considerable but bearable. Estimates are that the $80 million complex that it scrapped two years ago would cost at least $20 million more today.

Peace was hardly concluded with the city when another round opened in the exchange's bout with Washington over brokerage commissions. The Securities and Exchange Commission issued strong "recommendation" that the Big Board modify its commission structure to provide "volume discounts" for large transactions by mid-September. Currently, the broker's fee in a 1,000-share transaction is ten times that of a 100-share deal, even though the cost of executing the orders is the same.

Itself under pressure from the Justice Department, which questions the exchange's right to set commissions in the first place, the SEC wants the Big Board to come up with "interim" reforms. Specifically, the Big Board can either trim its rates on transactions of more than 400 shares or do away with minimum commissions on deals involving $50,000 or more, leaving it to brokers and high-volume customers to work out fees on their own. Whatever the exchange does, it faces its next battle next month, when the SEC opens long-awaited hearings on permanent changes in commission practices.

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