The Full-Service Era (Pre-1975)
Before the SEC's 1975 deregulation of brokerage commissions, retail investors paid fixed, regulated commissions for every trade — rates set by the NYSE. Access to equity investing was largely limited to wealthier individuals who could afford the commission structure. Full-service brokers provided investment advice as part of the relationship, justified by the commission revenue.
The Discount Broker Revolution (1975–2010)
Commission deregulation in 1975 enabled discount brokers to emerge. Charles Schwab founded his discount brokerage in 1975; others followed. Discount brokers charged lower commissions without full-service advice, democratizing equity investing for middle-class Americans. The internet accelerated this trend in the 1990s, bringing online trading to millions.
The Online Trading Revolution (1990s–2010s)
The rise of online trading platforms in the 1990s and 2000s further reduced commissions and made investing more accessible. Payment for order flow grew as a revenue model during this period. Citadel Securities built its retail market-making franchise during these years, growing its market share through PFOF-based arrangements with expanding discount brokers.
The Mobile App Era (2013–Present)
Robinhood's 2013 launch of commission-free mobile investing — followed by the 2019 industry-wide elimination of commissions — completed the transformation to zero-cost-visible investing. The mobile app era has brought millions of younger investors into markets but has also raised new concerns about platform design, PFOF, and the long-term financial wellbeing of frequently-trading retail investors.