Financial Supervisory Commission (FSC) Chairman Wellington Koo (顧立雄) yesterday voiced reservations about suggestions by lawmakers to lower trading fees on concerns that the practice would affect the long-term prospects of local brokerages.
As the TAIEX celebrates one -year of being above 10,000 points, lawmakers asked whether the exclusive operators of the nation’s stock and futures exchanges are not duty-bound to pass on windfalls from rising turnover and market rallies to investors.
Chinese Nationalist Party (KMT) caucus deputy secretary-general Tseng Ming-tsung (曾銘宗), who sits on the Legislative Yuan’s Finance Committee, proposed that the companies operating the Taiwan Stock Exchange (TWSE), Taipei Exchange (TPEX), Taiwan Futures Exchange (TAIFEX) and Taiwan Depository and Clearing Corp (TDCC) should cut their fees when their earnings rise above a certain threshold.
Such cuts could be implemented as earnings per share exceed NT$2 or NT$3, Tseng said.
The TWSE last year posted a profit of NT$2.86 billion (US$95.56 million), translating to earnings per share of NT$4.1, while the TAIFEX reported net income of NT$2.2 billion, or earnings per share of NT$7.05, Tseng said.
During the same period, the TPEX, which is structured as a foundation, posted earnings of NT$2.86 billion, Tseng added.
The commission would look into the proposal and study examples from abroad, Koo said, but added that brokerages have long opposed fee reductions, as the move would cause customers to ask for further discounts on their end and affect the viability of Taiwan’s capital markets.
Brokerages have said that their immediate concerns include the forthcoming trade-by-trade mechanism that would speed up matching of market orders and bring improved pricing information transparency for investors, as well as tax cuts to promote the development of Taiwan’s nascent warrant market, Koo said.
He said the commission hopes to promote sustainable development of the brokerage industry by raising investment participation.
The commission is to ensure that brokerages of all sizes can remain competitive following the implementation of the trade-by-trade mechanism, and subsidies are to be given to smaller firms that lack the resources to make the necessary information technology upgrades.
In the first four months, the nation’s stock brokerages reported profit gains of 55.68 percent annually to NT$10.51 billion, while futures brokerages posted pre-tax earnings of NT$1.41 billion during the period, up from a pre-tax loss of NT$137.12 million, TWSE and TAIFEX data showed.
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