SINGAPORE: With Singapore Exchange (SGX) cutting the size of board lots, some broking firms are giving discounts on commission fees for investors trading in fewer than 1,000 shares. Industry watchers have said commission fees should be adjusted beyond the promotional period, but broking firms said this will squeeze their margins.
Broking house Phillip Securities is charging its clients lower commission for online trades, from Jan 19 to Feb 27. This applies to orders of fewer than 1,000 shares and less than S$3,500.
It is among several other firms running promotions, ranging from a 30 per cent rebate off brokerage commission charge or the minimum brokerage commission fee with OCBC Securities, to three free trades with Maybank Kim Eng. As part of its promotions, DBS Vickers has lowered the minimum commission it charges to S$9.88, while over at Lim & Tan, the minimum has been reduced to S$10.
The broking houses are hoping to attract new clients, after SGX reduced the board lot size, from 1,000 shares to 100.
Industry observers said long-term fee adjustments should be considered.
Typically, the minimum commission charged by most broking houses in Singapore is S$25 for online trades and S$40 for offline. Now that the board lot size has been reduced, industry watchers said trading fees too should be adjusted to encourage retail investors to tap new investment opportunities with smaller lots.
Mr Jimmy Ho, president of the Society of Remisiers (Singapore), said: "My view is to go have two tiers with S$2,000 transaction value as a marker. For offline to be reduced, if below S$2,000, to S$20, and for online, S$15. Given the correct pricing structure with no harm on both ends, this initiative can take off."
However, Phillip Securities said that even though the transaction value may be lower, its fixed cost remains unchanged. For example, SGX charges 35 cents per trade, regardless of the value of the trade.
Mr Loh Hoon Sun, managing director of Phillip Securities, said: "For a broking firm to process a trade, from getting the order, to the dealer keying in and buying the stock for you, getting out the contract, getting payment from the client, getting the shares into their CDP account - it is a long process to get the trade done.
“And whether that trade is S$1,000, S$50,000 or S$100,000, it is the same. So there is a fixed cost for doing business or for executing a trade. So we really cannot bring the minimum too low, that it will not cover our cost."
The change in board lot size has just kicked in, and industry watchers said that so far, there has not been a significant increase in new account openings.
Some said more can be done to draw retail investors to the market. Mr David Gerald, president and CEO of Securities Investors Association (Singapore), said: "Brokers and traders need to consider seriously whether they are going to reduce their broking fee for small board lots, encourage their clients to invest more, bring in new clients - they are in a good position to do that.
‘They can also provide professional advisory services, help them to understand the stocks and companies … give them research reports in a very simple way and hold their hand. The small investors need to be assisted that way. And I think that way, they will have confidence and more will come into the market."
SGX said retail participation is now about a third of market volume, down from a high of 45 per cent in 2013.
- CNA/ms
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