Fri, Mar 03, 2000 page18

• Brokers' fees overhauled

  DEREGULATION Instead of conforming to the present five-tier structure, brokerage houses will be able to charge their customers what they like, up to 0.1425 percent

  • By Stanley Chou / STAFF REPORTER
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  Taiwan's five-tier brokerage commission rate structure will be replaced with a single cap on what securities house may charge their customers, with the rule change taking effect July 1, Securities and Futures Commission (SFC, 證期會) officials said Wednesday.

  "The present brokerage commission rate structure will be eliminated," Lin Tzong-yeong (林宗勇), SFC chairman, said Wednesday. "It will be replaced by flexible rate determined by individual brokerages, with a ceiling of 0.1425 percent for each securities transaction."

  The present rate structure is broken into five segments based on transaction value.

  At the high end, transactions under NT$10 million are charged a commission rate of 0.1425 percent. At the low end, the rate is 0.10 percent for transactions greater than NT$150 million in value. For OTC trade, however, the rate is a flat 0.1425 percent, regardless of transaction value.

  Beginning in July, both fee structures for the OTC and Taiwan Stock Exchange will be eliminated.

  Brokers would then be allowed to charge any rate they like, as long as it does not exceed the 0.1425 percent ceiling set by the SFC, officials said.

  Industry watchers said the SFC had little choice but to revamp the fee structure, especially as the growing popularity of buying and selling stocks over the Internet has led to lower commission rates.

  "Internet securities trading has made the five-segment fee structure obsolete by giving all kinds of discounts" to Web traders, said a senior executive of a brokerage house, which has recently begun to build up the Internet portion of its business. "The SFC has no other choice but to deregulate the commission rate structure completely."

  Meanwhile, the SFC has reached an agreement with the Central Bank of China (央行) regarding the issuance of overseas funds by security investment trust companies.

  Previously, just NT$30 billion in such investments industrywide had been allowed for the first half of this year. Now that has been lifted to NT$45 billion.

  The move could help relieve pressure on the New Taiwan dollar, which has appreciated recently as foreign institutional investors have been buying the currency in order to invest in the local market, CBC officials said. As investors in overseas markets, security investment trust companies would be sellers of NT dollars.

  According to the SFC, applications for overseas fund issuances for the first half of the year closed at the end of January. Fourteen overseas fund applications were received, for a total of NT$68 billion.

  The SFC will disclose its approval list in the next few weeks, with the earliest issuance of overseas funds taking place by the end of this month.

  However, in order to avoid any "crowding-out" effect these funds could bring to the local stock market, the SFC will spread out the issuance of the funds over time.

  Originally, the CBC decided that just NT$60 billion in overseas investment funds would be allowed this year, with NT$30 billion allowed for each of the year's first and second halves.

  But huge foreign inflows since the beginning of the year has pushed the NT dollar up. Also, more inflows are expected later in the year, especially as Morgan Stanley Capital International has increased its weighting of Taiwan stocks in its global indexes.

  After a two-year ban on overseas fund issuances, "This is the first time that the CBC has permitted the local fund industry to issue such funds," said K.P. Liu (劉凱平), president of SinoPro Securities Investment Consulting.

  "It shows that the monetary agency isn't worried about capital outflow problems."

  Instead, the CBC has turned its attention to the problem of too much capital inflow, which causes the NT dollar to appreciate, thus making Taiwan goods more expensive in markets abroad.

  "Whether such intervention in the capital market is correct or not," Liu said, "the good news is that the local fund industry can now participate in the bullish trend of global equity markets."

  Publication Notes

  Present fee structure

  * For transactions under NT$10m -- 0.1425% * Between NT$10m and NT$50m -- 0.1325% * Between NT$50m and NT$100m -- 0.1225% * Between NT$100m and NT$150m -- 0.11% * Beyond NT$150m -- 0.10%
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