Lawmakers bid to stop broker price war

A statutory stockbrokers' association is needed to set rules to stop cut-throat competition as a commissions war threatens to push fees too low for small players to survive, lawmakers have urged the government.

The proposal is among a list of suggestions submitted by financial services functional constituency lawmaker Christopher Cheung Wah-fung and other legislators from the Business and Professionals Alliance to Chief Executive Leung Chun-ying and Financial Secretary John Tsang Chun-wah ahead of Leung's policy address in January.

"The price war between stockbrokers has reached a stage of such cut-throat competition that some small and medium-sized brokers would find it hard to survive," Cheung said yesterday. "Some banks now offer zero commission while some brokers accept just 0.03 per cent or 0.05 per cent, which is too low to support the operating costs of brokers."

Twelve brokerages in the city have closed this year.

A report by the Securities and Futures Commission shows that total profits of the 400 or so smallest brokers stood at HK$522 million in the first half of this year, down 30 per cent from the second half of last year. That is despite market turnover having risen by 36 per cent in the same period.

Cheung said the price war was a result of the removal of the 0.25 per cent minimum brokerage commission a decade ago, which allowed brokers to freely set prices for clients.

He said he would like to see the minimum commission reintroduced for small trades, but there was little hope the government would accept that idea because it was keen to let the market determine prices.