PUBLISHED : Tuesday, 19 November, 2013, 1:25am
UPDATED : Tuesday, 19 November, 2013, 1:25am

Why statutory body may not be solution to brokers' woes

Fragmented industry and regulatory issues make it difficult for the plan to materialise


Enoch Yiu is the chief reporter of business pages at the Post. She writes feature stories with a focus on regulatory issues, stock exchanges, the Securities and Futures Commission, accountancy, insurance, pension and other financial industry development issuse. She has a weekly column, White Collar, covering the latest issues in the professional industry and also hosts podcasts and video programs on She is the author of two books.

Lawmakers have proposed the government establish a statutory stockbrokers' association to stop cut-throat industry competition. The plan, however, may be too difficult to turn into reality.

The proposal is among a wish list given to the government by financial services functional constituency lawmaker Christopher Cheung Wah-fung and other legislators from the Business and Professionals Alliance for Hong Kong.

Some brokers now accept commissions as low as 0.03 per cent for some trades, compared with the 0.25 per cent minimum rate charged before 2004.

More than 10 brokers have been closed this year, showing life for the 400 smallest brokers is getting more difficult. But setting up a statutory body may not be the solution.

First, it will not be easy logistically to set up such an organisation as there are nine broker bodies in the city with different backgrounds.

The next question is who should be the members. What makes a statutory body different from others is it requires those in the industry to be members.

The proposed statutory body should naturally cover all the about 500 stockbrokers in the city. But should it include banks? Right now, banks are big players in the securities trading markets but they all are members of the Hong Kong Association of Banks. They may not easily agree to be forced to join another body.

This means banks may not follow the rules laid down by the proposed body and could still offer low commission rates to compete for business.

Another question is what rules are needed to prevent cut-throat competition. Bringing back the minimum commission has always been desired by brokers but neither the customers nor the government like it. The competition law passed in June last year will also prevent any cartel activity.

The broker community may do better to focus on how to get new business than try to call the cartel back.



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