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HKEx to Remove Minimum Brokerage Commission in 2002
The Board of Hong Kong Exchanges and Clearing Limited (HKEx) Wednesday endorsed a proposal to remove the rules which fix the respective minimum brokerage commission rates for stock and futures transactions with effect from April 1, 2002.
After the proposals become effective, stockbrokers and futures brokers will be free to negotiate commission rates with their customers.
"The liberalization of commission rates opens an important chapter for Hong Kong's stock and futures markets as it will lead to freer and more healthy competition," said HKEx chairman Charles Lee.
"It is both the regional and global trend to go for free negotiation of brokerage commission rates. In order to maintain its position as a leading international financial center and in order to further develop its stock and futures markets into the regional markets of choice of international investors, it is only logical that Hong Kong should decide to remove the minimum commission rules," Lee continued.
At present, 13 of the 15 largest stock markets, ranked by market capitalization, in the world have adopted a system of free negotiation.
These include the United States, Japan, the United Kingdom, France, Germany, Canada, Italy, the Netherlands, Switzerland, Spain, Australia, Sweden and Finland. The only two exceptions are Hong Kong and Taiwan, ranking 10th and 13th, respectively. Most major international derivatives exchanges have also adopted a system of free negotiation, including exchanges in the United States, the United Kingdom, France, Australia, Singapore and South Korea.
"HKEx considers that Hong Kong must take proactive and market- driven initiatives in order to remain competitive in the world market and to meet the challenges it will face in the light of globalization and technological advancement," Lee stressed. "The liberalization of brokerage commission rates is one such initiative which, we believe, is in the interest of the investing public, the brokerage industry and the economic well-being of Hong Kong," he said.
According to Lee, the decision regarding the two-year transition to liberalization has been made after careful consideration and was aimed at allowing brokers to prepare for the change, if necessary, such as by improving cost-effectiveness and productivity.
The Securities and Futures Commission (SFC) of Hong Kong welcomed the move of HKEx, saying that "it has always been the policy of the SFC to encourage measures by the industry to make Hong Kong a cost effective place to conduct businesses."
"The proposal together with the reduction of the rate of stamp duty on stock transactions by 10 percent which was announced in the last budget speech will certainly enhance the competitiveness of the Hong Kong markets," said a spokesman for the SFC.
The commission will consider the proposal as soon as possible, said the spokesman. Under the Stock Exchanges Unification Ordinance, any proposal that may lead to amendment of the rules has to be sent to the Commission for approval before it is going to take effect.
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