Lehman Formula

Lehman Formula

A formula for determining a broker's commission for exceptionally large transactions. While there are variations on the formula and the numbers involved have changed over the years, the basic concept behind the Lehman formula remains that a broker charges a smaller percentage for each certain dollar amount that the transaction is worth. For example, in its original form, the Lehman formula charged a 5% commission for the first million dollars, 4% for the second million, 3% for the third million, 2% for the fourth million, and, finally, a 1% commission for everything above $4 million. It was developed by Lehman Brothers in the 1970s.