Based on announcements made by stockbroking companies and proposals received by the SC up to 31 December 2000, nine stockbroking companies have entered into firm agreements to acquire or merge with three other stockbroking companies and are at various stages of effecting the consolidation exercise. These nine stockbroking companies and their merger partners are set out in Table 1.
Acquiring three or more stockbroking companies is a necessary condition to become a Universal Broker. To qualify for Universal Broker, the merged stockbroking company will also be required to meet the quantitative and qualitative requirements as set out in the SC's Guidelines For A Universal Broker. Among these requirements is the need to have a minimum paid-up capital of RM250 million, minimum core capital of RM250 million and a capital adequacy ratio of at least 1.5 times. The merged stockbroking company must also satisfy the necessary fit and proper criteria.
As at 31 December 2000, one stockbroking company had proposed to acquire or merge with two other stockbroking companies, whilst seven others have proposed to acquire or merge with one other stockbroking company each. Another 12 stockbroking companies have yet to make any announcements or submit their proposals to the SC. However, most of these stockbroking companies have approached the SC and indicated their intention to participate in the consolidation exercise. (See Table 2)
To date, six stockbroking licences have been surrendered and their stockbroking businesses converted into branch offices. These six stockbroking companies are Omega Securities and Taiping Securities, Utama Securities, WK Securities, Premier Capital Securities, and Halim Securities, which have been converted into the branches of Hwang-DBS Securities, Sarawak Securities, Kuala Lumpur City Securities, OSK Securities and JF Apex Securities respectively. This has effectively reduced the number of stockbroking companies to 60.
Based on the relevant announcements and proposals received by the SC, it is expected that a further 30 stockbroking licences will be surrendered, further reducing the number of stockbroking companies by half to 30.
The SC announced the Policy Framework for Stockbroking Industry Consolidation in the second quarter of year 2000. The Policy Framework was a follow-up to earlier initiatives to encourage consolidation among stockbroking companies.
The Policy Framework advocates consolidation based on market-driven principles, allowing stockbroking companies to find their own merger partners and determine their own valuations. The objective of the exercise is to strengthen the industry and form a core group of well-capitalised stockbroking companies comprising mainly of Universal Brokers.
The SC has introduced several incentives to encourage the formation of Universal Brokers which include the right to carry out a full range of capital market services, open additional branch offices as well as tax benefits.
Stockbroking companies that do not intend to become or do not qualify as Universal Brokers are allowed to continue operating in their respective niche markets as Non-Universal Brokers. The SC is optimistic that the remaining 12 stockbroking companies will soon enter into merger agreements based on the commitment from members of the Association of Stockbroking Companies Malaysia as well as representatives of bank-backed stockbroking companies that they will merge with at least one other stockbroking company.
The SC will continue to drive the consolidation of the stockbroking industry and lend its full support to facilitate market-driven consolidation. The SC stresses that consolidation is important to develop more robust domestic market intermediaries with the ability to compete in an increasingly globalised and liberalised environment.
