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Tuesday, April 27, 2010

Transaction cost to be intervened: Competition among securities getting unhealthy

Tuesday, 27/04/2010 00:00 WIB

Transaction cost to be intervened: Competition among securities getting unhealthy

Irvin Avriano A.
Bisnis Indonesia

JAKARTA: The Capital Market and Finance Institutions Supervisory Agency (Bapepam-LK) eventually plans to intervene transaction cost and underwriting at securities with the new standardization regulation.

Chief of Bapepam-LK Ahmad Fuad Rahmany said the cost standardization should be made following the escalating unhealthy competition among securities companies.

"The point is that the market is no longer healthy. The only way is setting up regulation," he said at Bapepam-LK building in Jakarta yesterday.

Fuad said the unhealthy phenomenon of such a competition is obviously seen noting that some securities companies receiving and asking underwriting fee under 1 percent.

He said the plan will be questioned by the Business Competition Supervisory Committee (KPPU) as it was the case in the past. He said KPPU protested when the capital market authority plans to have securities standardization regulation.

Separately, Chief of securities companiesy and transaction bureau of Bapepam-LK Nurhadida pledged to talk about tariff and competition issues to the Indonesain Securities Companies Association (APEI) in the near future. "We will listen to their voice first," he said.

Coordinator of APEI Lily Widjaja was not available for comment on the regulation here.

But member of committee of APEI Mustofa said the association plans to propose the minimum transaction fee so as to prevent from uncontrollable drop of transaction and underwriting fee.

"We are discussing possible input on the minimum fee requirement while continue to comply with KPPU regulation. but the plan has not been talked with Bapepam-LK. We also plans to have study survey with other country."

Separately, president director of PT BNI Securities Eddy Siswanto understood the existing dilemmas of the capital market authority when it intends to regulate the fee because it is deemed the market mechanism.

However, it does not imply the core of unhealthy competition will have no solution. "As far as I knew, there is minimum fee requirement and it worked out well. So, it might be regulated that way."

Eddy said the minimum limit of fee appropriate with the given service is 15 basis points (bps) or 0.15 percent assuming 100 bps equals to 1 percent.

The figure is deemed appropriate if compared to the current fee set by the company at 20 bps for buy transaction and 30 bps for sell transaction.

Besides, unhealthy competition could slash the service quality given to the investors and decrease the quality and prudence principles among the capital market.

He said as early stage capital market players should make a deal. Then if it does not give any influence it is necessary to give a call or even stren measures form the capital market authority to mediate the pricing competition here.

Assertive measures are required upon noting that the unhealthy competition of transaction and underwriting fee. It is potentially to lead the capacities of some small scale investors to suffer from losses before closing it down. (Bisnis/iaa)

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