Wednesday, September 23, 2020

Stock Exchange tariff rebalancing hailed

The recent amendments to the Botswana Stock Exchange (BSE) fees and brokerage commissions have been hailed as a welcome development. The initial share commissions structure levied on investors by the broking firms has been changed to the negotiable charge of up to 1.85%, effective beginning of this month. Under the old regime, broking firms charged variable costs of between 1% for transactions that exceeded P100 000, 1.5% for a range of P50 001 and P100 000 and 2% for P50 000 and below.

Analyst at Capital Securities, Leutlwetse Tumelo, said the new flexible commission regime would boost competitiveness amongst brokers.
“This would encourage competitiveness that would even go beyond commissions,” he told Sunday Standard.

On fears of possible collusion in view of the fact that there are few firms in the market, he dismissed the insinuation on the basis that “the market is so small that there would be a room for collusion.”

Chief Executive Officer of Stockbrokers Botswana Geoffrey Bakwena echoed the same sentiments ÔÇô welcoming the new commissions’ structure and dismissing collusion fears.

“There won’t be any collusion. In fact, you don’t need to be three to collude, even when you are 100, you can still collude,” he explained.

He said the integrity of the current brokerage firms is beyond reproach.
“Even now, you will never see a situation whereby the three of us are holding the same volumes of shares of the same listed companies, so it should not start when it comes to commissions. Again, the new system gives investors the chance to shop around and negotiate prices and it is inconceivable that all of us would charge the same or have the same margin of discounted prices,” he explained.

Overall, Bakwena is of the view that the new system would go a long way in assisting to ease the problem of liquidity ÔÇô that is; if investors are negotiate lower commissions. Lower commission fee means lower costs of transaction and that can play a role frequent buying and selling of shares.

“You would notice that previously people used to buy and hold shares, partly because of prohibitive transaction costs. Now, if transaction costs are low, it means investors would be able to trade more often,” explained Bakwena.
He added that the new system was somewhat over-due, saying fixed commission charges are necessary in an emerging market but as the bourse grows, such as the BSE, transformations of this nature are relevant.

Of the 1.85%, a ceiling of 1.6% would accrue to brokerage firms after deductions of BSE fees and CSD which stand at 0.1%. BSE fees are 0.15% for transactions whose value is up to P5 million and that which exceeds P5 million brokers are levied 0.12%.

BSE spokesperson Juliana White said the new development was part of an integrated approach towards developing the domestic bourse and readying for making it a corporate entity.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.