THE Securities and Exchange Commission (SEC) announced on Wednesday a decision to remove the minimum commission that stockbrokers may charge their customers, aiming to stimulate activity within the capital market.
“The new rule allows brokers to set their own commission schedule for transactions with their customers, without the limitations of a prescribed regulatory minimum commission,” the SEC said in a statement, citing its Memorandum Circular No. 7 issued on April 16.
Before this circular, the SEC had issued a resolution in 1977 setting a broker’s commission rate at 1.5%, while guidelines from the Philippine Stock Exchange (PSE) mandated a minimum commission ranging from 0.25% to 0.05% of the value of a trade transaction.
“Lower transaction costs are vital in encouraging the public to invest their money in the stock market. The removal of the minimum stockbroker’s commission seeks to address this, and hopefully bring out more retail investors and spur trading activity,” SEC Chairperson Emilio B. Aquino said.
“The SEC will continue to review existing rules and regulations to see areas where we can make improvements to achieve our goal of boosting the capital market,” he added.
The regulator noted that the removal of the minimum commission considered the rise of online trading platforms, which allows for more cost-efficient transactions.
“It also takes cues from other neighboring jurisdictions, which do not prescribe a minimum stockbroker’s commission. The new rule likewise seeks to empower the investing public to engage the services of a broker of their choice based on cost preference,” the SEC said.
Sought for comment, China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message that the new rule increases competition.
“The liberalization of brokerage commissions is a significant reform that will create more competition among PSE trading participants and should help reduce the cost of investing in listed equities. It may also lead to more active trading and better liquidity in certain stocks,” he said.
COL Financial Group, Inc. Chief Equity Strategist April Lynn Lee-Tan said: “Clients can’t expect good service if commissions drop. Maybe some services that were free before like research reports will no longer be free, or brokers that provide better service can charge higher rates.”
“As to whether or not this will boost volumes, it’s a bit secondary, because if market conditions are poor, even if commissions are zero, volumes will not pick up,” she added. — Revin Mikhael D. Ochave