Net trading competition set to enter next phase

Last month, Taiwan's securities brokerages were targeting small investors by offering computer packages in the intensely competitive struggle to win market share in the budding Internet trading market. This month, several of them have extended their range to include larger investors. The move is likely to lead to a change in the structure of the securities trading brokerage commission rate, and foreshadows the emergence of a completely flexible and negotiable commission rate.

Following the special offers initiated last month by several brokerages which include a free computer and special commission rates to encourage customers to trade using the Internet, an increasing number of brokerages have responded with their own special deals. In the latest packages, brokerages have begun to offer commission discounts even to clients with trading volume of more than NT$1 million a month.

Last month, a number of brokerages, including President (統一), Yuan-ta (元大), Jih-sun (日盛）and Da-dong(大東), started offering their clients a free computer as part of a special Internet trading promotion.

In response, the Association of Securities Dealers (券商公會) also initiated a program which offered a free computer to the clients of any brokerage. In the current program, investors are exempted from paying any commission on the condition that their monthly trading volume remains less NT$1 million. So a trading volume that exceeds NT$1 million entails an obligation to pay the regular commission rate.

This month, not only have several other brokerages offered similar incentives, they have also provided investors with a commission discount for monthly trading volumes that exceed NT$1 million. The extension of the discount beyond the NT$1 million mark indicates that the battle for clients has already expanded to encompass medium and large sized investors, not just small investors.

Last week, for example, Kong-cheng Securities (公誠) started offering a 33 percent commission discount to any customers who traded through its Internet site. Further, any customer trading more than NT$10 million a month will not only continue to enjoy the commission discount, he will also receive a personal computer system equipped with two screens.

Capital Securities (群益) also began a similar program for its Internet customers. In its offer, a customer trading more than NT$50 million a month also receives a personal computer system designed with four screens. Both Kong-cheng and Capital also offer real-time news from the Central News Agency (中央社) to their customers who have a trading volume of NT$10 million or more.

Then this week, Taiwan Securities (台證) introduced its own commission discount program, which includes a commission rate of NT$1 for the first trade, regardless of the trading volume. For customers that open an Internet trading account before the end of 1999, subsequent trading will benefit from a 35 percent commission discount off the normal rate.

Meanwhile, the Association of Securities Dealers has already suggested that the Securities & Futures Commission (證管會) completely scrap the present 5-segment structure of the brokerage commission, which decreases from the ceiling rate of 0.1425 percent as trading volume increases. It has suggested that the future commission rate should be set by individual brokerages, after negotiation with its customers, at any rate under the ceiling rate of 0.1425 percent. SFC's chairman Tzong-Yeong Lin (林宗勇) is said to be giving the proposal serious consideration.