Malaysia's sets two-tier broking commissions

Malaysia's sets two-tier broking commissions

KUALA LUMPUR (AFP): Malaysia's stock exchange yesterday announced a two-tiered broker-to-broker commissions that will slash margins for foreign brokers dealing in Malaysian shares from abroad.

The Kuala Lumpur Stock Exchange fixed the rate following the Malaysian government's announcement last week of a graduated and regressive commission rate that from Monday will cut broking commissions of local brokers.

"It (the new rate) looks quite bad. Foreign brokers are expected to appeal to the authorities," said Yeoh Keat Seng, director of research of Crosby Securities research arm in Kuala Lumpur.

Singapore brokers, who have large dealings with local brokers, will be the hardest hit, although others in Hong Kong, London and New York, will equally be hurt, analysts here said.

From Monday, foreign brokers, who used to split commissions equally with Malaysian brokers they have transactions with, will now get less than their half share on a graduated basis as well.

While they still share 50:50 for transactions for the first 500,000 ringgit (US$200,000), foreign brokers will now only get one third while local brokers retain two-thirds of the 0.75 percent commission for transactions of between 500,001 and two million ringgit.

Commissions will be slashed down to three-tenths for foreign brokers, while local brokers retain seven-tenth of the 0.5 percent commission earned for transactions of above two million ringgit.

Other charges, including clearing fees, are to be borne by foreign brokers, the exchange said, adding that all broking houses are to abide by the new rate.

"Effectively foreign brokers will only earn between a miserly 0.1125 percent and 0.325 percent in commission for sharing deals with Malaysian brokers," said a broker with a foreign broking house.

The graduated scale followed the government's announcement last week of a regressive commission rate for local brokers as part of sweeping measures to liberalize the Malaysian capital market.

Brokers, who used to charge a flat one percent commission, will from Monday charge a one percent commission on transactions under 500,000 ringgit, 0.75 percent on deals of between 500,001 ringgit and two million ringgit, and 0.5 percent on transacted volumes over two million ringgit.

Malaysian officials said the lower fees were aimed at making local broking houses more competitive in the region.