HOW big is the soft dollar business in Hong Kong, and where is it going?IF compared to the United States or British markets, Hong Kong is still in the niche category. I would say less than 10 per cent of total volume is transacted on a soft dollar basis, whereas in the US it is at least 40 per cent. The fact that there are only three ''specialist'' soft dollar brokerages in Hong Kong gives an indication as to its size.
The industry has, however, grown rapidly over the past few years and I suspect that growth will continue until we start reaching levels that are consistent with other mature markets.
Have you any comments about the Securities and Futures Commission (SFC) consultation paper on cash rebates and soft commissions? We largely support the proposals dealing with soft commissions in the discussion paper.
The SFC really is not proposing anything more stringent than those regulations which are already in place in the US and Britain - markets, where Hoenig and the industry has thrived for many years.
If adopted in Hong Kong, these regulations will level the playing field for market participants, which is good, and further legitimise a practice which is already widely accepted around the globe. The added transparency brought on by disclosure requirements should allay any leftover concerns investors may have.
Many people appear to think cash rebates and soft commission are one and the same thing. Is this true and, if not, what is the difference between them? The main difference is that soft commission credits are discriminating, while cash rebates are not.