China proposes trading cost cuts for mutual funds, to regulate commissions

China’s securities regulator has published draft rules aimed at slashing trading commissions for mutual funds and addressing the conflict of interest between the securities trading and fund sales businesses of brokerages, the latest reform to the US$3.8 trillion mutual fund industry.

The China Securities Regulatory Commission (CSRC) said the proposals were designed to protect investors and better regulate the way fund managers allocate trading commissions.

The rules, published by the CSRC for public consultation on Friday, are the latest attempt by authorities to revive confidence in the sluggish stock market and comes five months after the regulator urged mutual funds to cut management fees and reduce costs for investors.

Analysts say the new rules would benefit brokerages with strong trading and research capabilities win commissions.

According to the draft rules, trading commissions would be reduced for both passive and active fund products. SWS Research estimates that overall commissions would be slashed by one third.