Wednesday, February 16, 2011

Bursa plans found wanting

Bursa Malaysia Securities Bhd's plans to revamp some of its rules for securities brokers, even though welcomed, are found wanting by most industry players.

On January 4, the regulator posted a 27-page consultation paper seeking feedback from industry players and the public on the proposed revamp of 11 areas of focus in the stockbroking industry.

The Association of Stock Broking Companies Malaysia (ASCM) said it welcomed some changes which allow Participating Organisations (POs) greater flexibility in managing and operating their respective businesses, moving towards a framework of self-regulation.

However, most POs regard the changes as insignificant in achieving a positive outcome for the industry.

A major concern is the element of conflict of interest between the roles of an exchange as a trading platform provider and a regulator.

It urged the Malaysian securities industry exponents to explore the practices of other markets where much of the frontline regulatory roles are performed by either the governmental agencies, such as the Securities Commission, or the stockbrokers' associations.

The ASCM was responding via e-mail to questions sent by Business Times.

On the liberalisation of commission-sharing between POs and remisiers effective January 1, the ASCM suggested the regulators set a ceiling to the remisiers' commission-sharing percentage as the absence of such control will result in an environment of unhealthy competition among POs. 

The association warned that the current practice would encourage poaching activities and suggested regulators impose a transfer fee mechanism on transfers of remisiers.

The ASCM also opined that the regulators use this opportunity to resolve a couple of delivery and settlement issues as well as look into the reduction of certain costs imposed on securities brokers.

It asks that regulators match the time of payment to selling client, and delivery of securities to buying client.

"Currently, there is a gap of about 2.5 hours and this is a concern to many, especially the foreign clients, as there is a lot of risks involved even within this short period," ASCM said.

It also suggests that POs be allowed to amend the contract on T+1 to avoid high instances of buying in, especially in a situation where the beneficial owner is the same.

This will also assist in resolving settlement issues faced by the foreign clients, where trades are done via intermediaries (inter-brokers). 

The association believes that Bursa Malaysia would greatly enhance and foster the growth of the industry if some five costs, which include Access Fees and Monthly/Annual Subscription Fees for CDS and dealings, be reduced in the sea of other escalating costs already faced by the industry.

The window period for feedback for the consultation paper ends tomorrow.