ASCM members to decide soon on minimum commission rates

  • Business
  • Saturday, 03 May 2003


OVER the next few days, the stockbroking industry is expected to know whether the minimum commission rates announced recently by the Association of Stockbroking Companies Malaysia (ASCM) would be maintained or reduced. 

Following an appeal by unhappy foreign brokers, the government requested the ASCM to re-look the minimum rates. 

At a meeting facilitated by the Securities Commission about a week ago, representatives from foreign brokers met the ASCM. It is believed that KLSE and Finance Ministry representatives were also present. 

Parties to the meeting were tip-lipped about its outcome, but an industry player said ASCM members were expected “to sit down and decide on the matter soon”. 

Last month, ASCM set the minimum rates at 0.125% for inter-broker rates, 0.225% for institutional rates, 0.3% for retail trades above RM100,000, and 0.6% for retail trades of up to RM100,000. 

Foreign brokers contend the rates are too high and their margins would become terribly squeezed as they already charge their institutional clients about 0.2% for all trades. 

May 12 is the date set for the implementation of the new rates. 

A foreign broker, noting that matters are generally consensus-driven, said he hoped there would be an agreement on the rates. “But it depends on whose point of view is more important.” 

That seems to be the crux of the problem. 

Many local brokers perceive themselves as being worse off than their foreign counterparts. 

“Everybody is squeezed, so we don't see why the local brokers should subsidise the foreign brokers and be held to threats not to market Malaysia,” said a local player. 

Her argument is that if the foreign brokers' clients want to trade in Malaysian stocks, they will, regardless of the rates. Moreover, she contends that equity trading is set to become only an ancillary part of their business – if not already – and that many earn far more in Malaysia from private placements and consultancy and advisory work. 

On the flip side, a market player commented that foreign brokers do all the legwork, that is, they do the hard-sell convincing their clients that Malaysian stocks are worth a buy. The orders are then routed through the local brokers. “Their point of view is there is little value added from the local side,” the market player said. 

“In the past few years those brokers that have relied on the inter-broker business have not done well because there had not been much buying. But now, even though volumes are so low, the foreign brokers still want low rates. What's needed is a compromise,” he observed. 

In some ways, it is understandable why foreign brokers are up in arms. Inter-broker-wise, they were previously paying anything from 4 to 10 basis points, with some broking firms even doing inter-broker trades for nothing. 

“This isn't healthy, and without a minimum commission rate, the industry is not viable,” the local player maintained. 

Most think the ASCM, in whose court the ball now seems to be, will quickly get down to considering ways of fine tuning the rates in view of the looming May 12 deadline, and if it is at all possible, to emerge from the deliberations with a win-win situation. 

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