Australian brokers resist changes

Press, 21 December 1981, Page 20

Australian brokers resist changes

PA Sydney De-regulation of fixed brokerage rates, and the entry of institutions, such as merchant banks, into the stock broking fraternity would reduce competition in the securities industry and spawn inefficiency in Australian capital markets, the Australian Associated Stock Exchanges argued in a submission released on Friday. The 271-page submission to the Trade Practices Commission supports applications for the authorization of agreements on business rules between member exchanges and broking firms. The submission also analyses criticisms of the monopoly position of brokers and exchanges, which have largely come from merchant banks. ■ , ■■■ •.. . ..-

The exchanges argue'that the arrangements do ndt substantially. lessen competition in the capital market. “If they do, because for example, they are deemed to.

do so by statute, the public benefits arising therefroni outweigh any public detriment that may emerge from a lessening of competition,” the submission says.

“The existence of independent broking firms acting as agents is essential to the efficient functioning of the stock market and ‘ therefore is a public benefit.” The exchanges say any change to the independence of a broking firm would result in a confusion of purposes, and threaten the.efficiency of the market. The submission argues strongly against suggestions for the abolition of a fixed brokerage' schedule in favour of negotiated brokerage. “In essence, the abolition of fixed brokerage fees is a prescription for unanticipated structural change in the provision of broking services, and an uncertain restructuring of the Australian stock market,” it says. “Abandoning fixed broker-

age would risk market efficiency and open possibilities for taking business ‘off-mar-ket’ or ‘off-shore’ to sustain earnings.” It says that existing brokerage rates provide continuity in the marketplace and long-term viability of member firms.

It says de-regulation would lead to a restriction of the over-all level of broking services because of the demise of some member firms, a in over-all market competition, and higher brokerage rates for private individuals.

"Availability of broking services in Adelaide, Brisbane, Hobart, and Perth would be curtailed — with the risk that the stock exchanges in those cities will be unable to continue operation.”

The submission says these Smaller exchanges are valuable for' local companies wishing to trade securities qr .raise capital, and offer vital access to the marketplace .for a small investor.