Fees suggested for incoming brokers
The stock exchange is proposing charging fees to new brokers following the creation of an enlarged exchange in an attempt to protect the interests of its members, according to chairman Lee Hon-chiu.
The proposal is seen as a sweetener to win support from brokers for the Government's radical market reforms.
Small brokers have raised fears that an influx of big international brokerages after the reforms will drive them out of business.
The reforms, announced in last month's Budget, will change the face of the Hong Kong market by merging and demutualising the stock and futures exchanges and their associate clearing houses into a new entity to be listed in September next year.
By separating trading from ownership rights, the reforms will effectively remove a cap on the number of brokers.
To go ahead, the reforms will need the support of 75 per cent each of the 500 stock brokers and 130 futures brokers in a vote to be held in August.
The Institute of Securities Dealers, which represents about 300 brokers, aired numerous concerns over the reforms to the stock exchange last month.
Mr Lee said the exchange would suggest the enlarged exchange collect user fees from new entrants, while existing brokers would be exempt.
'The fee would ensure the enlarged exchange has a stable income,' Mr Lee said.
Institute chairman Keith Lam Hon-keung welcomed the suggestion, but urged the Government to take further measures to curb the number of new entrants.
'We proposed the new enlarged exchange should not accept any new broker members for one to three years after the reforms,' Mr Lam said. 'This will allow existing brokers a grace period to cope with the new market environment before new entrants come in.' Mr Lee promised to address brokers' concerns over the removal of the cap on new brokers.
Another concern among brokers is the value of their memberships.
Mr Lee said Merrill Lynch - the stock exchange's financial adviser on the impending reforms - would use various factors to calculate the value, including the present and past membership price, and the valuation of membership in cases of similar mergers overseas.
Mr Lam said the institute had collected more suggestions from brokers, including calls to increase the transaction levy paid by investors on every share transaction to 0.01 per cent of the value of trades, up from 0.007 per cent.
This would enable the new exchange to have sufficient income for its development, they contended.
Brokers also suggested the new enlarged exchange issue new shares to raise funds when it lists next year.
SWEETENER Proposal intended to mollify members worried about reforms Call made to suspend post-merger broker entry for one to three years Other measures mooted include raising transaction levy on value of trades
