Price War Among Hong Kong Brokers Continues

by Philip Morton, Investors Offshore.com

05 April 2002

According to a report in the South China Morning Post on Thursday, the price war between online brokers in Hong Kong is continuing apace, despite the fact that the abolition of the minimum commission fee has now been postponed until next April.

Hong Kong Exchanges and Clearing rules state that brokerages based in the SAR are not permitted to charge less than a 0.25% minimum commission rate. However, brokerage firms are able to circumvent this rule by using a non-exchange party as an intermediary, which will cover the commissions which should have been paid by their client.

The SCMP revealed that several of the country's online brokerages, such as KGI Asia, South China Online, and SC Trade are offering schemes which allow clients to trade at well below the minimum commission levels.

Speaking on Wednesday, Chief Executive of South China Online, Stewart Shing Shin-cheung explained that: 'We believe a low price is always an effective way to attract traders to trade online.'

According to the newspaper, the price war has now begun to spread to offline brokerages and 'bricks and clicks' firms as well, with Tai Fook Securities offering new clients a cash rebate of up to HK$1,000 for opening a trading account this month.

The news will doubtless create concern among the numerous small brokers whose protests led the SAR government to postpone the abolition of the minimum commission fee, in order to avert this very situation.

Recommended