Stockbrokers expand coverage

  • Business
  • Saturday, 31 May 2003

A TOTAL of six universal brokers have collectively set up 56 branch offices in various locations as at Dec 31 last year. 

With these branches, the electronic access facilities (EAFs) and EAFs with additional permitted activities, the presence of stockbroking companies has increased two-fold to 133 locations from the initial 66 locations. 

As at Dec 31, 2002, the number of stockbroking companies stood at 40 compared with 66 when the policy for consolidation of the stockbroking industry was first announced in 2000. 

“Based on announcements made by stockbroking companies, eight stockbroking firms have announced to merge with at least three stockbroking companies each and nine stockbroking companies with one stockbroking company each. 

“Sixteen stockbroking companies have yet to make any announcements or submit their proposals to the commission,” the Securities Commission (SC) said in its 2002 annual report. 

Of the eight stockbroking companies that have announced to merge with at least three stockbroking companies each, six have been granted universal broker status. 

The six are Hwang-DBS Securities Bhd, OSK Securities Bhd, Kuala Lumpur City Securities Sdn Bhd, K&N Kenanga Bhd, PM Securities Sdn Bhd and Avenue Securities Sdn Bhd. 

SC said its policy framework for the consolidation of the stockbroking industry, which set out the criteria, incentives and other guidelines for stockbroking companies to become universal brokers, was announced in the second quarter of 2000 and advocated a market-driven approach. 

It said universal brokers could now undertake additional permitted activities at an electronic access facility such as placement of licensed dealer's representative, futures broker's representatives and dual licence holders, opening and closing of trading accounts and/or securities accounts, and receipt and payment of clients' monies. 

The universal brokers could also market or sell approved financial products and services and conduct placement and utilisation of broker-front-end and CDS terminal and/or servers at the EAF. 

The SC also said 37 of the total 40 stockbroking companies had complied with the minimum capital adequacy requirement (CAR) ratio of 1.5 times for universal brokers and 1.2 times for non-universal brokers. 

The three companies that had not complied with the minimum CAR ratio were placed under trading restrictions by the KLSE. 

“The CAR framework was developed on the basis that a stockbroking company's access to sufficient liquid capital enables it to protect itself, its clients and counterparties from consequential losses. 

“These requirements are in tandem with international minimum capital standards,” the SC said. 

The commission added that the KLSE had embarked on a project to develop a new CAR system that was expected to include new risk factors. 

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