Brokers welcomed the proposal to cut the stock and futures trading levy by 20 per cent, but want the government to go further and consider reducing stamp duty to boost turnover. The levies, paid by investors when they trade stocks and derivatives, are collected by the Securities and Futures Commission for one of its main source of income. Under Henry Tang Ying-yen's proposal, the levy on securities trading will be reduced from 0.005 per cent to 0.004 per cent of the transaction. The levy for each futures contract will also be reduced 20 per cent, to 80 cents, and on each options contract to 16 cents. The reduction was expected to save investors up to $400 million a year, Mr Tang said. Hong Kong Stockbrokers Association chairman Anthony Espina said the levy cut showed the government wanted to boost market turnover, but it was too small to have a significant impact. 'Under the proposal, the cut will save $1 for an investor on each $100,000 worth of stock transactions. This is far too little to encourage more market turnover,' Mr Espina said. The government should consider cutting the 0.1 per cent stamp duty paid by the investor to the government on stock transactions. If the stamp duty was reduced 20 per cent, investors would save about $2 billion a year - five times more than what was possible with a levy cut, he said. Hong Kong Institute of Securities Dealers chairman Vincent Lee Kwan-ho echoed Mr Espina's remarks. 'A reduction of stamp duty would bring Hong Kong in line with other advanced stock markets, which have abolished stamp duty. As the government has a surplus now, it is time for it to consider cutting stamp duty,' Mr Lee said. Hong Kong Institute of Directors chairman Herbert Hui Ho-ming said the government should look beyond lowering trading cost. 'The government will only attract international investors to trade in the local market when it further enhances corporate governance and the quality of listed companies in Hong Kong,' Mr Hui said. He called on the government to move quickly to give statutory backing to listing rules and move forward with plans to set up the Financial Reporting Council, an auditing watchdog. 'Investors do not want talk but action by the government to upgrade the quality of the local market,' Mr Hui said. The SFC said it had tightened expenditure and its healthy financial position allowed it to cope with a lower levy. 'While the transaction levy has been a main source of income for the SFC, we are confident that the reduction will not affect the effectiveness and efficiency of our statutory regulatory functions,' commission chairman Martin Wheatley said. Hong Kong Exchanges and Clearing expects the proposed reduction will help lower overall transaction costs, which will encourage more trading and boost the competitiveness of Hong Kong's financial markets. The stock exchange also supports Mr Tang's budget proposal to further expand the scope for banks to conduct more types of yuan businesses. By the end of last year, 38 banks in Hong Kong were providing yuan deposit-taking, exchange and remittance services. Total yuan deposits reached 22.6 billion yuan, and the cumulative amount of cash withdrawals using yuan debit and credit cards amounted to $9.4 billion.