Before there were any discount brokers, investing was mainly for the fairly wealthy only. Joe Blow just couldn't afford it. Full service brokers were the way to buy stocks but they charged literally hundreds of dollars to buy and sell for you. They were the ones who had a seat on the stock exchange, where trades were made and prices for trades were set.
The age of the discount broker started in 1975.
On May 1, 1975, the U.S. Congress deregulated the stock brokerage industry by taking away the power of the New York Stock Exchange to determine the commission rates charged by its members. This opened the door to discount brokers and made negotiated commissions available to individual investors.
When the federal government eliminated fixed commission rates in 1975, Quick & Reilly, with a staff of only four, was the first company with a seat on the New York Stock Exchange to offer a significant discount to the public--40 percent below the standard rate--for its no-frills service. Like full-service houses, the company assigned each customer a particular broker, but these officers did not receive commissions nor offer any investment advice.
Although Quick & Reilly was first on the discount scene, the public did not immediately beat a path to its door, and before the year was out Reilly had left the firm. The situation changed after the company received a mention on television news. In Quick's words, "people walked in with shopping bags loaded with stock certificates."
Establishing branch offices set Quick & Reilly (and Schwab & Co.) apart from run-of-the-mill discounters.
First Omaha Securities was one of the first firms to offer negotiated commissions, later known as discount brokerage, in 1975.
First Omaha Securities later became First National Brokerage Services, and then Accutrade.
In 1987 TransTerra Co. was established as the holding company for AmeriTrade. TransTerra was renamed Ameritrade.
TD Bank had first entered the sector in 1984 by establishing Green Line Investor Services, which quickly became the dominant discount broker in Canada and by 1996 held about 70 percent of the Canadian market. Running out of room to expand Green Line in its home market, Toronto-Dominion completed a series of acquisitions to create an international discount brokerage operation. In October 1996 TD Bank acquired New York-based Waterhouse Investor Services, the number four discount broker in the United States. They changed the name of their discount broker to TD Waterhouse.