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Stockbrokers write to CSE requesting brokerage fee hike

10 Oct 2013 - {{hitsCtrl.values.hits}}

Sri Lanka’s stockbrokers have written to the Colombo Stock Exchange (CSE) requesting a hike in the brokerage fees citing financial hardships they are currently undergoing amid relatively low market turnover levels, Mirror Business learns.

According to market sources, the brokers have requested to increase the brokerage fee on transactions below Rs.50 million to 0.75 percent from the current 0.64 percent and to up minimum floor brokerage for deals over Rs.50 million to 0.40 percent from the current 0.20 percent.

They further said the brokers had also requested to increase the negotiable brokerage threshold to Rs.75 million from the present Rs.50 million. The threshold was brought down to Rs.50 million in August 2010 from Rs.100 million.

The Colombo Stock Brokers Association (CSBA) newly appointed President Dihan Dedigama, when inquired, confirmed that they had written to the CSE requesting a hike in brokerage but was hesitant to provide particulars included in the request.

According to him, the brokers have found it extremely difficult to operate in the present challenging economic environment where costs have gone up and the market turnover levels have come down sharply compared with the last two to three years.

“Some brokers are even shutting down their operations in regional CSE branches to cut costs,” Dedigama said.

Out of the 29 brokers operating in the CSE, 23 are CSBA members. CT Smith Stockbrokers, Somerville Stockbrokers, IIFL Securities, Capital Alliance, JB Securities and First Capital (only debt trading) are not CSBA members.

When contacted, Securities and Exchange Commission (SEC) Chairman Dr. Nalaka Godahewa told Mirror Business that after discussion among its board members, the CSE had forwarded a request by the brokers pertaining to brokerage fee hike and said the commissioners are yet to take the matter up for deliberations.

The brokerage fees were brought down in end-2010 and early 2011 by the SEC to attract more local and foreign investors to re-rating market after the conclusion of the 25-year civil conflict.

With the conclusion of the war with the LTTE, the average daily market turnover jumped to Rs.2.3 billion in 2010 from Rs.593.6 million. In 2011, the average daily market turnover stood at Rs.2.2 billion.

But as the euphoria subsided, the overheated market underwent a painful correction in 2012, causing inexperienced retail investors to lose millions and the average daily turnover slumped to Rs.883.6 million.

The average daily turnover this year up to October 8 stood at Rs.873.2 million.

Considering the financial difficulties the stockbroking community is supposedly facing, the SEC recently resolved to grant Rs.125,000 per broking institution to attend overseas equity market promotional roadshows organised jointly by the SEC and CSE.

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Stockbrokers write to CSE requesting brokerage fee hike

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