CMA’s green light for new brokerage fee structure

20/10/2011 00:00 AST

The Capital Market Authority (CMA) has approved a proposal to bring down trading fee for brokerage firms operating on the Muscat Securities Market (MSM).

The decision was taken by the board at its meeting on October 16. The commission of brokerage firms has been brought down to 0.35 per cent of the traded share value for activating trading on the bourse, which is facing dwindling volumes.

A circular said computation of fees based on segment is no longer applicable. In the case of bonds, brokers can charge 0.005 per cent and calculation based on segment is no more applicable.

As far as commission on off the floor trade is concerned, the CMA said MSM will charge 0.02 per cent of the value of each transaction.

Meanwhile, the market watchdog earlier announced a series of incentives for brokerage firms that go for merger before 2011. The incentives for merging firms include exemption from licensing fees, annual subscription and the fees for carrying out the activities for three years.

A CMA circular said merging firms are also exempted from paying stock market’s share in the trading commission for one year from the date of merger.

CMA has announced the incentives for merger in an apparent move to achieve economies of scale and to make financially strong entities at a time the traded volumes are falling.

In fact, small brokerage firms on the local bourse are on dire straights, on dearth of business and two players have already closed down operations. Dwindling market volumes are affecting the very viability of brokerage houses in Oman, especially small players.

The average daily market turnover has plummeted to as low as RO2-3 million now, from RO6-7 million in the first quarter. According to market operators, an important problem faced by pension funds is that they are unable to deal in several stocks due to a CMA stipulation.

barring board members from dealing in shares close to the announcement of financial results. Since pension funds have board membership in several companies, they can not buy or sell shares in those companies for a period between September-end and until they announce third quarter results, which is aimed at checking insider trading.

Times of Oman