KARACHI: Pakistan Stock Exchange (PSX) on Monday announced standard commission rates to be collected by brokerages from customers for processing orders in different types of transactions, a development that delighted the brokers, but dismayed the day traders.
The PSX, in an official notification, said the minimum commission range would be Re0.3/share or 0.15 percent of the transaction value -whichever was higher. However, it added that the brokerage commission shall not increase 2.5 percent of the transaction value.
The announcement did not go well with the day traders, who even staged a small protest at the PSX, fearing an increase in the cost of trading.
Ahsan Mehanti, Director Arif Habib Corp, said the development was both positive and negative for the market.
“Overall the industry is facing turmoil and it is the responsibility of the bourse to support brokerage house,” Mehanti added.
Securities and Exchange Commission of Pakistan (SECP) and the PSX are unanimous in their observation that many brokerage houses were charging nominal or zero commission rates, which was adversely affecting true competition and creating a disadvantage for market participants in the form of disparity in service standards.
Mehanti further said these prescribed rates would help loss-making brokerage houses to cut their losses and even make profits; however, on the other hand the cost borne by clients would increase, impacting trading activity.
“Moreover, the trading volumes will decline as the investors will not opt for alternative avenues such as the national savings and fixed deposits that were offering competitive returns,” he said.
The statement said this development would be helpful in enhancing quality standard of brokerage services including research, encouraging expansion of distribution network for brokerage services, improving proficiency and technical infrastructure of brokers and maintaining minimum level of governance and regulatory requirements.
All these ensuing reasons will contribute to the economic progression and benefit investors at large in the long run, it added.
Following the due process including extensive consultations with all the stakeholders and with the approval of its Board and the SECP, the PSX introduced the standard range/scale of brokerage commission with effect from October 14, 2019.
(This news/article originally appeared in The News on October 15th, 2019)