[JulieSmithXIV]

Meeting with Kittiratt set for this Thursday

The Stock Exchange of Thailand still supports policies to liberalise the securities sector, while brokers offer mixed reactions on whether to reverse market-opening policies or continue with current development plans.


To open or not is no longer a subject of debate. The question today is when.

Since January, commission fees charged to retail investors have been made freely negotiable and new licences open for application under a long-standing plan to liberalise the securities sector.

But Kittiratt Na-Ranong, the finance minister and a former SET president, last month called for a rethink of the liberalisation policy, saying that more time is needed for brokers to adjust before competitive constraints are lifted.

The SEC and the SET, however, have said they remain committed to plans to open the market to benefit investors and prepare for the advent of the Asean Economic Community in 2015.

SET president Charamporn Jotikasthira said the market would hold talks with the Association of Securities Companies this week before meeting with Mr Kittiratt and other market policymakers on Thursday.

He said brokers would be asked to present their views on liberalisation, and why they sought a return to the minimum commission fee system used in previous years.

"We want to address any obstacles that exist," Mr Charamporn said. "But whether the solutions affect pricing remains to be seen. If we talk about quality issues, then we should focus on quality. We want to see if there is any solution that doesn't require changes in the commission policy."

He said the SET does not want to have to interfere in brokerage operations or assist in enforcing pricing policies as in the past.

"[Commission rates] are now open, and the SET no longer has to interfere in the market, which is in line with international standards," he said. "But we have to wait and see. If there weren't any problems, then [the brokers] wouldn't be raising the issue."

The SEC, for its part, has already stated that it favours liberalisation and scrapping the long-standing oligopoly in the securities sector by opening the market to new entrants.

Similarly, regulators want to do away with collusion in fixing commission fees and allow market forces to dictate rates.

But brokers argue that without minimum fees, competitive pressures would result in a decline in services, particularly research functions, as securities firms would be compelled to cut costs to help maintain profits.

A brief experiment with liberalised commission fees nearly a decade ago saw profits fall sharply across the sector, leading the SET, the Association of Securities Companies and the SEC to agree to bring back the fixed commission system.

Pattera Dilokrungthirapop, chairwoman of the Association of Securities Companies (Asco), acknowledged that the industry group had asked the SET to review the liberalisation policy.

But she said that the request should be taken in perspective of a larger development plan proposed by Asco, touching on human resources development, improvement in research quality and analyst training, and the development of new products and services for the capital market.

Suchai Sutasthumkul, chief executive of CIMB Securities, said that what was needed was a clear consensus on policy.

Reversing the current liberalisation policy would result in lower price competition, and most likely remove incentives for a number of firms to invest to boost their service quality, research units and operating efficiency.

On the other hand, Mr Suchai, speaking as an Asco executive director, said unrestricted price competition would limit some firms in investing, particularly as Asco had yet to fully develop into a self-regulatory body.

As a result, brokers are asking for additional time to upgrade Asco into a self-regulatory organisation, fully empowered by the SEC to regulate business operators, before fees are fully liberalised.

'The fact is that brokers have prepared for liberalisation for some time now, and some are ready," Mr Suchai said. "Personally, whether we liberalise or not is much the same. If we liberalise, we will compete on price. If not, we will compete in other areas."