Recently, the Singapore Exchange (SGX) reduced the minimum board lot size from 1,000 shares to 100. At the same time, many retail investors are crying for brokerage commissions to be reduced, especially the minimum commissions for Internet and broker-assisted trades.
Many brokerages have already come up with promotional rates for this roll-out. (“Reduced board lot size: Some broking firms giving discounts”; Jan 22, Channel NewsAsia)
However, as Phillip Securities’ managing director said rightly, there are fixed costs for doing business or executing a trade, and bringing the minimum fee down may not cover the costs.
It is always a trade-off when it comes to fees. Retail investors would want the minimum to be as low as possible.
In the Channel NewsAsia report, the Society of Remisiers (Singapore) president proposed a two-tier minimum commission structure — S$15 for online trades and S$20 for broker-assisted trades — with S$2,000 as the dividing line.
The society is already complaining that remisiers’ take-home pay is low. Would not reducing these minimum commissions make the situation worse?
Firstly, what cost figures is the proposal based on, and would it enable broking houses to survive, let alone break even? If broking houses cannot survive, can remisiers?
Secondly, will these reduced commission rates bring in more trades, and how much more? As some stakeholders have said in the media, the SGX’s new initiative will only increase business marginally.
It is best to leave broking houses to decide on commissions. They know the costs involved and how much to charge clients: Too high and they lose a chunk of business; too low and they run themselves into the ground.
Many brokerages have already come up with promotional rates for this roll-out. (“Reduced board lot size: Some broking firms giving discounts”; Jan 22, Channel NewsAsia)
However, as Phillip Securities’ managing director said rightly, there are fixed costs for doing business or executing a trade, and bringing the minimum fee down may not cover the costs.
It is always a trade-off when it comes to fees. Retail investors would want the minimum to be as low as possible.
In the Channel NewsAsia report, the Society of Remisiers (Singapore) president proposed a two-tier minimum commission structure — S$15 for online trades and S$20 for broker-assisted trades — with S$2,000 as the dividing line.
The society is already complaining that remisiers’ take-home pay is low. Would not reducing these minimum commissions make the situation worse?
Firstly, what cost figures is the proposal based on, and would it enable broking houses to survive, let alone break even? If broking houses cannot survive, can remisiers?
Secondly, will these reduced commission rates bring in more trades, and how much more? As some stakeholders have said in the media, the SGX’s new initiative will only increase business marginally.
It is best to leave broking houses to decide on commissions. They know the costs involved and how much to charge clients: Too high and they lose a chunk of business; too low and they run themselves into the ground.
