Securities companies urge SEC to review

The association of securities companies has urged the Securities and Exchange Commission (SEC) to review the liberalisation plan for securities licence and brokerage fee following the collapse of the US-based Lehman Brothers.

A source at the association said that the securities industry was concerned that the plan would have a negative impact on the industry.

"We are concerned that about 40 securities firms will be hit adversely from the intense competition since the outbreak of the US financial crisis," said the source.

However, the source said the association has not received any reply from SEC as yet.

The source said that the SEC would like to wait and see the situation first. If there are clear indications that Thai securities houses would not survive under the given situation, there could be a review of the plan whether it should liberalise the brokerage business or not.

SEC, the source said, had not commited to reviewing the plan, but only gave the reason that there was still room for business adjustment of brokers. Many securities houses have already prepared for the liberalisation of securities licences and brokerage fee.

Out of a total 40 brokerages, about 15 firms have a majority shareholding by foreign investors, according to the source.

"In Thailand, the capital market is very small and suitable to be liberalised at a level. Complete liberalisation will lead to a monopoly by a few large firms in the market," said the source.

The source said if the SEC consented to review the plan, the association had already prepared an initial study for consideration.

The study projected four scenarios of earnings projections in 2010 when the brokerage fee is liberalised at different rates.

The securities houses will post a total net profit of Bt5.92 billion in case the brokerage fee rate is at 0.175 per cent on average. Returns on equity for the industry will be at 6.9 per cent.

In case brokerage fee rate is 1.5 per cent, the industry will post a total net profit of Bt4.39 billion and return on equity will be 5.2 per cent.

If the brokerage fee rate is at 0.125 per cent, the industry's overall net profit will be Bt2.86 billion and return on equity will be 3.4 per cent.

If the brokerage fee is at 0.1 per cent, the industry's net profit will be Bt1.35 billion and returns on equity ratio will be only 1.6 per cent.

The industry's revenue projection in 2010 is based on the average growth rate of 27 per cent annually from 2008.

"As shown in the study, if there is fully-completed liberalisation in the securities business, it is believed that many small securities houses will either close or merge their businesses, especially those who have a securities trading market share of less than 2 per cent," said the source.