The SC takes cognisance of the issues raised by these parties. Having carefully considered their views, the SC has decided that, in the interest of alleviating some of the practical difficulties faced by the industry, the SC will allow some flexibility to the earlier policy framework in order to facilitate the process of stockbroking consolidation.

Specifically, the following revisions are made. Firstly, the deadline of 31 December 2000, which was the limitation date for stockbrokers to conclude firm merger agreements will be removed. However, the SC will closely monitor the progress of consolidation within the industry and will make the necessary policy review, including the time element if the process of industry consolidation is not occurring at a satisfactory pace and degree.

Secondly, as previously announced, stockbrokers will be allowed to find their own merger partners but the acquisition prices and valuation methods will be left to the decision of the parties involved.

Thirdly, the limitations placed on individuals having effective control in both a financial institution and a stockbroker and on the business of the immediate holding company of a stockbroker (except to the extent as it may be affected by the ruling relating to property and construction businesses) are now no longer applicable. However, a group which owns a stockbroking interest is not permitted to undertake or hold any property or construction business; details of this policy will be advised to members of the ASCM shortly.

The SC also clarifies that the segregation of broking business from financial institutions will not be required. Measures to deal with issues of conflict of interest will be addressed after consultation with the industry.

The SC continues to pursue the objective of industry consolidation with the view to strengthen the stockbroking industry to prepare the industry to face the challenges of liberalisation and globalisation. The SC would also like to see a core group of well-capitalised, full-service Universal Brokers, which can provide efficient and cost-effective capital market intermediation services.

In order to promote and incentivise consolidation, stockbrokers which qualify as Universal Brokers will continue to be given the benefits as previously set out in the Policy Framework for the Consolidation of the Stockbroking Industry. These include tax credits for accumulated losses carried forward, stamp duty and real property gains tax exemptions. As an additional incentive, a Universal Broker will immediately be allowed to operate an additional branch at any location subject to the SC's approval. Any future branching policy of the SC will continue to favour Universal Brokers. Universal Brokers will also be allowed to offer the full range of capital market products and services as and when they become available.

Specific proposals announced on 21 April 2000 in relation to the lowering of transaction costs are not affected. These are necessary to create a more competitive capital market which would ultimately benefit investors.

As previously announced, the liberalisation of commission rates will continue to be implemented in two stages:

• in Stage 1, which takes effect from 1 September 2000, commission rates for all trades above RM100,000 will be fully negotiable. Trades with contract values of RM100,000 and below will be subject to a fixed rate of 0.75%; and
• in Stage 2, which takes effect from 1 July 2001, commission rates will be fully negotiable for all trades, subject to a cap of 0.70%. However the SC will review the situation before implementing this second stage.