7 - 13 December 2000

Commission rates liberalised but small investors may suffer

by David Kelleher

The liberalisation of rates for investing customers will not necessarily offer stockbrokers’ clients a better deal, industry sources said yesterday.
Speaking to The Malta Business Weekly, a number of financial analysts said that although the fees and rates charged to customers was no longer regulated by the Malta Stock Exchange, this did not mean that clients would be better off. On the contrary, sources said, the chances were that smaller investors would be forced to pay more.
“In principle, the liberalisation of commission fees for stockbrokers’ clients should lead to a better deal for them, however, experience has shown abroad that the opposite happens,” one financial analyst told The Malta Business Weekly.
“When rates were liberalised abroad, stockbrokers began charging fees that while attractive to the
larger investors, they served as a disincentive for smaller clients,” the analyst said.
On Tuesday, the Malta Stock Exchange announced changes to Council Notice 1, whereby commission fees would no longer be regulated by the stock exchange but agreed upon by the brokers themselves. In turn, the Malta Stock Exchange doubled its fees for every contract from Lm1 to Lm2.
“Although this may seem to be a small increase, the MSE will now be charging double. On small amounts this is not significant, but on a large number of transactions, charges will be considerable,” another analyst said.
Sources close to the stockbrokers said there was still a certain amount of bad blood between the Stock Exchange and stockbrokers.
“The first signs of tension became apparent in June when the MSE announced the new draft laws. While the stockbrokers were called in for what was supposed to be a ‘consultation’ meeting, they were merely informed of the changes.
“Another point is the recent visit by the President to the Stock Exchange. Although many did not expect to be invited, stockbrokers felt that they should have at least been informed. This happened again a few days ago when the Stock Exchange announced that a public meeting will be held on Monday. Stockbrokers got to know of this through the newspapers,” the sources said. They added that while these were small details, they did not help to foster a greater level of cooperation between the two bodies.