JSX cuts transaction fee rate
JAKARTA (JP): The Jakarta Stock Exchange (JSX) yesterday lowered the rate of its transaction fees from 0.07 percent to 0.04 percent of cumulative monthly transaction value in a bid to rejuvenate trading on the capital market.
"The cut of the fee rate, which has been approved by the Capital Market Supervisory Agency (Bapepam), is designed to attract more investors and to boost the participation of securities companies," a director of the JSX, Mas Achmad Daniri, told The Jakarta Post yesterday.
The JSX requires investors to pay commissions to brokerage houses for buying and selling shares on the exchange. The size of the commissions is based on an agreement between the investors and the brokers but they must not exceed 1 percent of the transaction value made by the investors.
The brokerage houses then pay transaction fees to the JSX out of their accumulated commissions.
"We have made such a decision because we found out that total funds needed for investment this year can be reduced from Rp 20 billion (US$8.5 million) to only Rp 10 billion," Daniri said.
The JSX has often been criticized for defending a high rate of transaction fees despite the fact that it is a non-profit oriented business entity. Last year, the JSX cut the fee rate by only 0.01 percent from 0.08 percent, saying that it still needed large sums of money to finance several projects.
Daniri said that before the annual general meeting of JSX shareholders on April 14, the management had actually proposed 0.05 percent as the new rate.
"However it didn't come into force as it was still subject to Bapepam's approval," Daniri added.
The JSX, according to Daniri, will take equity participation in the establishment of a Securities Clearing and Guarantee House and a Central Depository House.
The new law on capital markets, which came into effect earlier this year, stipulates the split of the current Indonesian Securities Clearing Depository into the two different institutions.
The law also requires the JSX and the Surabaya Stock Exchange (SSX) to become the majority shareholders in the planned Clearing and Guarantee House.
"We realize that other parties are interested in investing in the two planned houses. Therefore, the reduction of our investment will not hinder the plans for the establishment of the two houses," he added.
A senior trader from PT Sanyo Primarindo, Nadjib Usman, told the Post that the 0.03-point cut of the transaction fee rate is not surprising as many securities companies have urged the JSX to reduce it.
"It's very positive although we realize that the rate of transaction fees is not the key factor which will boost our earnings," he said.
A senior dealer from PT Baring Securities Indonesia, who preferred anonymity, said that the new rate might not affect the revenues of securities companies.
"It depends on how a securities company sets the commissions from investors. I think the new rate will not influence the securities companies which do not charge fixed rates of commission," the dealer said.
Ignasius Yonan from PT Sigma Batara echoed the idea that the new rate will attract more investors but it is not likely to increase the incomes of brokerage houses.
"I think investors will also ask brokerage houses to reduce their commission rates," he added.
Yonan and Nadjib concurred that the lowering of the fee rate will particularly benefit big securities companies which usually get big orders from institutional investors.
He said that because of settlement risks, most institutional investors will prefer to contact big securities companies.
"On the other hand, there is almost no difference in the operational costs between big transactions and small transactions. Therefore, it's very difficult for a securities company which concentrates merely on serving retail investors to take advantage from the new rate," Yonan added.
"In some cases, small transactions mean higher costs. That's why most local brokers don't want to open branches in other cities in the country since most domestic investors make small transactions," Nadjib said.
The two analysts also said that the lowering of the rate will further tighten competition among brokerage houses because many of them usually use lower commission rates to attract investors.
"I believe that no securities companies have charged a commission rate of up to 1 percent. Most of them set their commission rates below 0.50 percent," Nadjib added.
The new rate established by the JSX management is equal to the rate set by the SSX.
Many brokers have made use of lower fee rates to win big transactions, known as crossing transactions, through the Surabaya-based exchange.
Therefore, the new rate is likely to have a bad impact on the inactive SSX. (08)