The independent brokerage firm is dying. Big consumer banks are taking over the business, partly because they have better customer traffic. But this is happening mainly because big banks have better internet trading platforms. The Hong Kong stock exchange used to be owned and operated by the brokerage firms, which inserted a rule requiring all trade done through the exchange carry a minimum brokerage commission of 0.25 per cent of the value of each trade. It was a cartel, and it charged cartel pricing. The stock exchange's listing in 2000 took the bourse out of the hands of the brokers, setting the stage for the termination of the minimum brokerage fee, which expired in 2003. Fast forward to today, and the independent brokerages are finding themselves increasingly uncompetitive with the large retail banks. These days, the battle is all about charging the lowest fee via the best internet trading platform. The banks' massive resources and large client bases give them advantages over the independent shops. A 2001 survey of public investors by the Hong Kong exchange noted that 46 per cent of people who trade stocks used banks, and 42 per cent used brokerages. By 2011, the proportion of people using banks climbed to 74 per cent. Brokerages claimed only 18 per cent. Meanwhile, the percentage of investors who trade online exclusively is rising. Web brokerage now captures 69 per cent of the total trading among individual investors. The name of the game is to build an excellent, easy-to-use internet platform with lots of extras and attract the most volume. One employee of an independent brokerage, who wished to go unnamed, says independent brokerages are fighting a losing battle against the banks. Banks are able to tie up online stock trading with internet banking, allowing people to shift funds from different accounts and to get a consolidated statement each month. The small brokerages find it hard to compete with that offering. They are compensating by trying to open lines of business with better profit margins, like wealth advisory. Some clients still like to pick up the telephone and talk to a broker, and the independent shops still excel at that role. Smaller firms might also be more willing to extend margin financing to a long-term client; the big banks don't know their clients as well as the smaller shops. Nevertheless, it is striking how, after all these years, the banks and brokerages have stuck largely to the old pricing of the pre-2003 era. Many firms still charge a basic rate of 0.25 per cent, or quite near it. The industry is consolidating, and the independent brokerage business is shrinking. But the internet started that transformation, not fee competition.