Underwriters face price war<\/p>\n
The Capital Market Supervisory Agency (Bapepam) raised concerns
\non Friday over the cutthroat \"fee war\" among players in the
\nunderwriting business, particularly in regards bonds issues,
\nwhich it described as \"unhealthy\".<\/p>\n
While the agency does not view the fee war as posing a
\nsystemic danger to the industry, it is still creating a worry as
\nto its potential impact on the quality of underwriting services,
\nsaid Bapepam chairman Herwidayatmo.<\/p>\n
\"We'll look into it and invite the players to find out what's
\nreally going on and whether or not the trend is normal,\"
\nHerwidayatmo said on Friday.<\/p>\n
\"If we find underwriters working for very low fees ... we'll
\nask them where they get the money to cover their expenses,\" he
\nsaid.<\/p>\n
He did not provide further details on the meeting.<\/p>\n
Underwriting is a service merchant banks provide for the
\nissuance of bond shares. Firms making new issues do not know in
\nadvance whether there will be sufficient demand -- from public or
\ninstitutional investors -- for the shares or bonds at the issue
\nprice. An underwriter removes the sales uncertainty by promising
\nto buy any the market does not take up, and charges a commission
\nfor this service.<\/p>\n
As the amount of commission is determined by the market
\nmechanism, no ruling has been made to standardize fee rates.
\nRecent developments, however, show that many underwriters,
\nparticularly for the booming bond issue sector, are offering
\ntheir services for less and less.<\/p>\n
Fees charged by underwriters were typically between 1.5 and
\n2.5 percent of the value of securities or bond issues, but many
\nare now offering as low as a 0.75 percent commission. -- JP<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/underwriters-face-price-war-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}