Malaysia moves ahead with negotiable commission rates for all trades from 1 July

Malaysia will proceed as scheduled with the second stage of stockbroking commission rates liberalisation on 1 July 2002, with negotiable commission rates, subject to a cap of 0.7%.

This liberalisation of stockbroking commission rates is in accordance with the Malaysian Capital Market Masterplan (CMP). Recommendation 83 of the CMP states that stockbroking commission rates will be liberalised in two stages. Stage 1 was implemented on 1 September 2000 and involved liberalising commission rates for all trades above RM100,000 while trades with contract values of RM100,000 and below were subject to a fixed rate of 0.75%.

Stage 2 which provides for commission rates to be negotiable for all trades, subject to a cap of 0.70% was originally scheduled to be implemented on 1 July 2001 but was deferred for a year in response to appeals from industry participants. The deferment was to allow the industry to concentrate efforts and resources on market driven consolidation.

The liberalisation of the commission rates is part of the SC’s overall plan to make transactions costs on the Kuala Lumpur Stock Exchange (KLSE) more competitive. As such, Stage 1 and Stage 2 had also involved reductions in the System on Computerised Order Routing and Execution (SCORE) fee, Securities Clearing Automated Network Services (SCANS) fee, and the SC levy, all of which have already been implemented. The transaction costs for trading in derivative products are also fully negotiable.

In a related matter, the SC has also considered a proposal from the Association of Stockbroking Companies in Malaysia (ASCM) for an increase in the minimum handling charge, which is presently fixed at RM5 per contract (for all securities other than loan instruments).

The SC, upon review of ASCM’s proposal and the impact to investors, has decided on a minimum handling charge per contract of RM12 (for all securities other than loan instruments) after taking into consideration the average variable cost for the stockbroking industry for all contracts executed in 2001. The SC’s decision is also based on the need to balance the financial viability of stockbrokers and the competitiveness of transaction costs for investors. The minimum handling charge per contract is implemented through the KLSE Rules.

The minimum handling charge per contract for loan instruments remains at RM2.

24 June 2002