The Boston Stock Exchange

06Jun16

Morin wasted no time in developing a niche securities practice that brought him and the firm significant success. It began inconspicuously enough in the relatively small-time world of the Boston Stock Exchange, where small regional securities firms fought for a small number of small-issue public offerings that small New England companies could not afford to bring to the Big Board, equity “private offerings” that had been made possible through the newly adopted “Regulation D,” and small-block trades in public stock. One of the principal underwriters on the Boston exchange was Cantella & Co., Inc., a family-owned trading firm run by Vincent Cantella.

Cantella was a virtual caricature of the ethnic Italian. Tall and slim, the devout Catholic had dark, deep-set eyes, and a vulture-like posture. He could have been a walk-on in any Mario Puzo movie. In the 1960’s in Boston, such a figure did not attract the interest of the white shoe corporate law firms. They were not interested in his type. Cantella and Morin found affinity in their antipathy toward the Brahmin elite, and Morin began representing Cantella & Co. when no “reputable” (i.e., white shoe) Boston firm would do so. And the niche he found with Cantella became substantial and formidable.

At the time, the SEC required that all commissions charged by registered broker-dealers for public securities trades to be “fixed.” In other words, every trade made on a regulated exchange could charge a fixed fee, no matter how many shares were involved in the trade. This rule worked to the significant advantage of the major Wall Street firms (not coincidentally), which could afford to trade in huge blocks involving tens of thousands of shares, thus cutting the per-share cost of the commission to a pennies-per-share level. In addition, the NYSE member firms had devised ways of structuring “discount” commissions to their preferred customers, a practice that neither the NYSE nor the SEC was willing to police.

This left the regional exchanges in a weak competitive position, scrapping over the trades and issues that were too small to interest the large broker-dealers. And none of the regional exchanges were aggressive or inventive enough to devise a means of competing for larger trades – until Cantella and Morin got together. With Cantella’s enthusiastic backing, Morin devised a number of methods by which regional exchanges and their members could pool their trading business in a particular transaction, enabling them to compete with the big firms. These schemes, all perfectly legal, were given obscure names such as “customer-directed give-ups,” the “two-way ticket,” the “three-way ticket,” the “mirror trade,” and something called the “aunt minnie trade,” which was named after Morin’s aunt, Margaret “Minnie” Sullivan. These methods would allow member firms of the regional exchanges to increase their volume of trading in a competitive manner – but none more that Cantella & Co., which by 1966 was the dominant trader on all of the regional exchanges, but especially on the Boston Stock Exchange.

In time, when the successes of Cantella & Co. were learned by the white shoe firms in Boston, some of them decided that Vinnie’s ethnicity and religion could be overlooked, and they came calling for his business. Vinnie Cantella responded to them in his own fashion. “Go fuck yourself,” he said. “Charlie Morin’s my lawyer.”

In 1966, the Boston Stock Exchange was in need of a new chairman. Some of the old-line bokerage firms wanted hand-pick their man, but Cantella was too important to the order-flow of the Exchange, so he held a virtual veto on anyone who did not meet his needs. Calling around one day seeking names, Morin spoke with Jim Dowd, who was the SEC regional administrator in the Boston office. Dowd told Morin about a fellow named Freddie Moss, who was a member of the SEC’s Washington office staff and had worked on the ground-breaking two-year special study of the securities market from 1963-65.

Moss was the right guy for both Morin and Cantella – he was from Brooklyn, was Jewish (although not “too Jewish”), smart, tough, and definitely not white shoe. They approached him, and talked him into leaving the SEC to come to Boston to be the chairman of the Boston Stock Exchange.

With this move, Morin now had the Boston Stock Exchange locked up as a client. Moss was its head, he owed his job to Cantella and Morin, and he understood loyalty.

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