The discussion regarding the abolish of the minimum stock brokerage commission framework was held at the Financial Affairs Panel of the Legislative Council. [CB(1)1248/02-03(02)] March 28, 2003
Release Date: 2003-03-26
Ref. SC20030226/1038
February 26, 2003
To: The Tripartite Task Force
Regarding the discussions held on January 24 between the Tripartite Task Force and our association concerning the proposal on how to improve the business environment for the securities industry mentioned in the letter dated January 21:
Our association fundamentally supports the four proposals suggested by the Tripartite Task Force. In the medium to long term, these will have a positive impact on the development of the securities industry. However, they do not adequately address the urgent assistance and needs of the industry at present; it can be said that they are merely superficial solutions. The Tripartite Task Force also acknowledged that these four proposals have been continuously implemented over the past one to two years. Therefore, our association perceives the intent and purpose behind the Tripartite Task Force's recommendations as an attempt to mitigate opposition to the abolition of the minimum commission system. The various proposals put forth by the Task Force aim to alleviate the grievances of the industry. The abolition of the minimum commission system will ultimately lead to hopelessness for practitioners, causing them to leave the industry. How will they benefit from the proposals of the Tripartite Task Force in the future?
The destruction of the business environment has necessitated the collaboration of the Tripartite Task Force to devise improvements. We believe that the reasons for this destruction are as follows:
1. Investor confidence has been shattered, leading to reduced investment willingness, such as:
a. The “penny stock” incident;
b. Deteriorating corporate governance quality.
2. Confidence in the industry's prospects has been undermined, resulting in business closures and unemployment issues:
a. The abolition of the minimum commission of 0.25% significantly impacts small and medium-sized securities firms and most brokerage practitioners;
b. Financial resource reporting regulations;
c. Government's tolerance of unfair competition from banks in the securities industry;
d. High costs for licensing and registration of securities practitioners;
e. Rising operational costs for securities firms.
3. The rapid policy changes in the three-tier regulatory framework:
a. International alignment;
b. Disconnect from the current Hong Kong economy.
4. The downturn in the local economic environment.
Our union believes that immediate actions are necessary to:
1. Restore confidence among practitioners by maintaining the minimum commission of 0.25% to stabilize their outlook on the industry's prospects.
2. Improve the communication methods of the Tripartite Task Force regarding the three-tier regulatory framework and genuinely consult the industry for suggestions, gradually restoring investor confidence, which will naturally increase investment willingness.
3. Ensure that the securities industry policies of the Tripartite Task Force align with the local Hong Kong economy, avoiding blind alignment with international standards.
4. The economic environment fluctuates; as long as all parties support each other, everyone can work, and together we can weather difficulties. Dawn will eventually arrive.
Furthermore, the Special Administrative Region (SAR) government established the Tripartite Task Force to study how to improve the business environment for brokers and strengthen the competitiveness of small and medium-sized enterprises. However, the SAR government has not taken measures to prevent malicious competition in commission rates for securities trading and to avoid market monopolization by large firms and banks. Our union urges the authorities to incorporate these two areas into their work.
We firmly believe that while the external and local economic environments may not be immediately resolved by you or me, the confidence issues within the industry rely on your group reconsidering the realistic environment and reflecting this to the heads of the Special Administrative Region, the Financial Secretary, and the Secretary for Financial Services and the Treasury with a spirit of rectification. This will undoubtedly improve the pressing issues concerning the business environment.
This letter is delivered for your kind attention.
Sincerely,
Wong Kwok On David
Hong Kong Securities and Futures Industry Staff Union
February 26, 2003
To: The Tripartite Task Force
Regarding the discussions held on January 24 between the Tripartite Task Force and our association concerning the proposal on how to improve the business environment for the securities industry mentioned in the letter dated January 21:
Our association fundamentally supports the four proposals suggested by the Tripartite Task Force. In the medium to long term, these will have a positive impact on the development of the securities industry. However, they do not adequately address the urgent assistance and needs of the industry at present; it can be said that they are merely superficial solutions. The Tripartite Task Force also acknowledged that these four proposals have been continuously implemented over the past one to two years. Therefore, our association perceives the intent and purpose behind the Tripartite Task Force's recommendations as an attempt to mitigate opposition to the abolition of the minimum commission system. The various proposals put forth by the Task Force aim to alleviate the grievances of the industry. The abolition of the minimum commission system will ultimately lead to hopelessness for practitioners, causing them to leave the industry. How will they benefit from the proposals of the Tripartite Task Force in the future?
The destruction of the business environment has necessitated the collaboration of the Tripartite Task Force to devise improvements. We believe that the reasons for this destruction are as follows:
1. Investor confidence has been shattered, leading to reduced investment willingness, such as:
a. The “penny stock” incident;
b. Deteriorating corporate governance quality.
2. Confidence in the industry's prospects has been undermined, resulting in business closures and unemployment issues:
a. The abolition of the minimum commission of 0.25% significantly impacts small and medium-sized securities firms and most brokerage practitioners;
b. Financial resource reporting regulations;
c. Government's tolerance of unfair competition from banks in the securities industry;
d. High costs for licensing and registration of securities practitioners;
e. Rising operational costs for securities firms.
3. The rapid policy changes in the three-tier regulatory framework:
a. International alignment;
b. Disconnect from the current Hong Kong economy.
4. The downturn in the local economic environment.
Our union believes that immediate actions are necessary to:
1. Restore confidence among practitioners by maintaining the minimum commission of 0.25% to stabilize their outlook on the industry's prospects.
2. Improve the communication methods of the Tripartite Task Force regarding the three-tier regulatory framework and genuinely consult the industry for suggestions, gradually restoring investor confidence, which will naturally increase investment willingness.
3. Ensure that the securities industry policies of the Tripartite Task Force align with the local Hong Kong economy, avoiding blind alignment with international standards.
4. The economic environment fluctuates; as long as all parties support each other, everyone can work, and together we can weather difficulties. Dawn will eventually arrive.
Furthermore, the Special Administrative Region (SAR) government established the Tripartite Task Force to study how to improve the business environment for brokers and strengthen the competitiveness of small and medium-sized enterprises. However, the SAR government has not taken measures to prevent malicious competition in commission rates for securities trading and to avoid market monopolization by large firms and banks. Our union urges the authorities to incorporate these two areas into their work.
We firmly believe that while the external and local economic environments may not be immediately resolved by you or me, the confidence issues within the industry rely on your group reconsidering the realistic environment and reflecting this to the heads of the Special Administrative Region, the Financial Secretary, and the Secretary for Financial Services and the Treasury with a spirit of rectification. This will undoubtedly improve the pressing issues concerning the business environment.
This letter is delivered for your kind attention.
Sincerely,
Wong Kwok On David
Hong Kong Securities and Futures Industry Staff Union