The city should reinstate minimum brokerage commissions to stop cutthroat competition in the industry, a Legislative Council hopeful says.
Many brokers wanted to reintroduce the 0.25 per cent minimum commission for transactions below HK$200,000 to provide a basic income for brokers, said Christopher Cheung Wah-fung, one of five candidates contesting the functional constituency seat that represented the financial services sector.
In April 2003, the city removed the minimum fee of 0.25 per cent for all trades to lower costs for investors. Since then, some brokers have competed on commissions as low as a few dollars per trade.
"The low turnover this year, which has dropped more than 40 per cent from last year, has forced some small players out of business," Cheung said. "There is cutthroat competition as some are reducing prices below their cost, which is not healthy."
He said a minimum commission system allowed for a basic income. "Some brokers earn only a few thousand dollars a month, which is below the minimum wage requirement. Banks can charge customers a fee for small deposit accounts, so why can't brokers charge a minimum commission for small trades? If the government want to lower trading costs, it should reduce stamp duties on share transactions."
Cheung has been a broker for 41 years and owns brokerage firm Christfund Securities.
Chim Pui-chung, who occupied the financial services seat for 20 years from 1991, is not seeking re-election. While Chim has not supported any candidate, his son has helped Cheung to lobby for votes. "I have always highly respected Chim's contributions to the industry," Cheung said.
His four election competitors are Vincent Lee Kwan-ho, Tang Yu-lap, Patrick Lam Tak-ming and Frankie Yan Man-sing.