CMA has published new commissions short-circuiting NSE bid to be allowed to set industry fees.
The new commissions are based on recommendations from a study done by an independent consultant.
The Capital Markets Authority (CMA) proposal to review fees, levies and commissions has opened a new battle front with Nairobi Securities Exchange (NSE) brokers whose revenue is expected to shrink.
The regulator has published new commissions based on recommendations from a study done by an independent consultant, short-circuiting NSE bid to be allowed to set industry fees.
In a nutshell, the new rules will see brokers contribute to the Investor Compensation Fund (ICF) for both bond and equity trades, reducing their take-home.
“NSE as the trading platform for trading products is best placed to determine the congruence of demand and supply and set industry fees on this basis, while taking cognisance of all stakeholder interests,” said the NSE in its memorandum.
CMA in a reply at the committee, however, opposed the NSE proposal saying that demutualisation would convert the NSE into a profit-driven entity hence the need for oversight on fees. This, argued CMA, would ensure all fees are justified and eliminate barriers for investors and market players to participate in capital markets.
One of the CMA contentious recommendations is to have stockbrokers and investment banks contribute to the ICF instead of investors who are either buying stocks or bonds.
“Contribution by investors will cease, market intermediaries trading in the secondary market (investment banks and stockbrokers) will commence contributions towards ICF,” says the proposal.
Investors in stocks traditionally pay a 0.10 per cent fee to the ICF as opposed to stockbrokers and investment banks. No ICF fee is paid when buying or selling a bond but recommendation is to have investment banks and stockbrokers pay a 0.04 per cent ICF levy for every bond sold.
The CMA said that the review of the fee structure is meant to increase the sector’s stability and is borrowing from global practices where traders and not investors contribute to the ICF.
Stockbrokers say the proposals would not make investors wealthier but only hurt traders.
The Kenya Association of Stockbrokers and Investment Banks, the industry lobby group, said that the additional levy would only increase costs to an industry that operates on thin margins.
“All the money stockbrokers made in 2012 is the same as a mid-tier bank,” said chief executive Willie Njoroge.
There are 10 investment banks and 11 stockbrokers licensed by the markets regulator.
