The Box Rate: a flat fee, and a 70% discount rewritten to 90% (1999)

What the price cut was really measuring

The fee schedule published in May discounted by 70% at most. What forced it to be rewritten at 90% was neither research nor competitive analysis but a single customer’s email: “I had overrated Matsui Securities. It is disappointing.” Asked why 70% was not enough, Matsui explained himself not in terms of high and low prices but in terms of how long the contest would take to settle. If rivals flying the internet-trading flag went under while the fight dragged on, confidence in that form of trading itself would be damaged. It was a decision about price, but what Matsui was actually measuring was time.

The time that a 90% discount bought was short. That same summer, Orix Securities and DLJdirect SFG Securities announced steeper discounts still, and the advantage measured purely on price was gone before deregulation day arrived. Matsui thereafter kept its distance from the commission war, and its average commission rate in the year to March 2005 was more than double E*Trade’s. The reality he had seen at NYK — that customers pay only for costs they can accept as reasonable — worked just as ruthlessly on the side that had cut its prices.