Stockbrokers to SEC: Leave commissions alone

Stockbrokers want their commissions and charges from trading transactions better left among themselves instead of being set by the Securities and Exchange Commission, although the rates will have to conform within a prescribed range.

In a position paper on the proposed implementing rules and regulations (IRR), of the new Securities Regulations Code (SRC), the Philippine Stock Exchange said "commissions and charges are commercial issues, rather than regulatory issues," as any involvement of the regulator (in this case the SEC) in a commercial issue "makes the regulator in effect a partner in the broker’s business."

Under the SEC proposal, it sets the charges by a broker for services performed within "reasonable" levels but the PSE said this is a mere "subjective standard of questionable practical implementation by parties other than the concerned businessman."

"Being subjective, is this not better left to the broker’s customers, to the account relationship and to competition to determine? Real estate brokers charge 1.5 to 10 percent or more, stockbrokers charge 1.5 percent or next to nothing; who is to say what rate is correct and reasonable?" the PSE said.

It added the involvement of the regulator in rate setting could also be a source of abuse of power. "Moreover, the unnecessary increase in paperwork and administrative formalities may erode the effective implementation of sound regulation and expand the scope of misuse of administrative discretion and corruption" the PSE paper said.

For its part, the PSE said not only a maximum commission rate (currently pegged at 1.5 percent) should be in place but a minimum rate as well.

Under the PSE’s six-level graduated commission rate table, trades of P100,000 or below will be slapped a 1.5 percent commission rate, going down to between 0.25 percent and 0.49 percent as trade value increases to P5 million and one peso and above.

"Fixing maximum and minimum commission rates based on value trades will be more beneficial to both brokers and clients. Cutthroat competition among brokers will be minimized and customers pay lesser commission as the value of their transactions gets higher," the PSE said.

Generally, commission charges are usually on account history in terms of time, prompt payment/delivery, size, or the size of the order being given at the time when the customer is negotiating his commission or charges.

But there are instances where commissions are not always based on such criteria since there is a tendency for brokers to offer prospective clients lower rates than that offered by other brokers just to obtain the account, to the extent that such rates are no longer competitive.