BROKERS' CHARGES.

Otago Witness, Issue 2397, 8 February 1900, Page 21

BROKERS' CHARGES.

INTERVIEW WITH THE CHAIRMAN OF THE DUNEDIN STOCK EXCHANGE. In view of the amount of discussion which has lately taken place relative to the charges made by sharebrokers for mining transactions a reporter from this paper yesterday waited upon the chairman of the Dunedin Stock Exchange (Mr A. Herdman) for the purpose of ascertaining the brokers' side of the case. The reporter having stated the objects of his mission to Mr Herdman, asked if he though* theie weie reasonable grounds for the complaint made by some people that the brokerage charges were excessive. Mr Herdman said in reply: In my opinion, No. Under the old scale of rates the seller was charged by his broker 2J pcx" cent, while on the other hand the buying broker added what he thought was fair as his commission. But the buyers' commission was not stated in the contract note, and it i 3 just here where the kernel of the whole thing lies. People used to think that when they commissioned a broker to buy he did not charge commission for it, but he did. He added on the amount of purchase money what he considered was a fair amount of commission. Now we have altered that. The system was a bad one. Clients were quite in the dark as to what they were charged, and so we have introduced a new system. The reporter requested Mr Herdman to be kind engugh to explain the new system. Mr Herdman: Under the new system there is a fixed scale drawn by comparison with the rates in force in Melbourne and other places, allowing, however, for the fact that the volume of business is not the same. The charges are divided between the b.u^er syjd. the seller^ and. ai

as in nine cases out of 10 the business is done between brokers, there is only one commission received by them for each transaction. And, as I said before, the commission is clearly stated on the contract note, whether to buyer or seller. Reporter: So that the new system in that respect is much more equitable. And how does it compare with the old system in the amount charged for brokerage. Mr Herdman : The new S3 r stem is not only more equitable, but the scale of charges under it is considerably less than that under the old system, yet complaint is made by some against the new system, and there was not a word said against the old. In order to make this clear I would be glad if you would publish the scale at present in force and the scale that was formerly in force. The public tan see for themselves the reduction that has been made. Mr Herdman here handed the reporter a copy of the two scales. The following is the Old Scale. On debentures of every description l'per cent. On shares other than mining . . 2J per cent. On mining shares sold up to 6d per share . . . . . . . . Id On mining shares sold over 6d and up to Is . . ljtl On mining shares sold over Is and and up to 3s . . . . . . 2d On mining shares sold over 3s and up to 5s . . . . . . . . 3d On mining shares sold over 5s and up to 10s 4J3 On mining shares sold over 10s and up to 20s Gd On mining shares sold over 205.-. 1\ per cent. A minimum charge of 10s on any transaction. Buyers pay stamp duty and transfer fees. The following is the New Scale. Rates of brokerage on mining shares chargeable to buyer or seller: — On debentures of every desciiption . . l per cent. On shares other than mining - . . 25 per cent. On mining shares sold up to 6d per share . . . . . . . . *d On mining shares sold over 6d and up to Is 6d . . . . '. . id On mining shares sold over Is 6d . and up to 3s . . . . . . lid On mining shares sold over 3s and up to 5s 2d On mining shares sold over 5s and up to 10s 3d On mining shares sold over 10s and up to 20s .. ... .. 4d On mining shaies sold over 20s and up to 30s 41 d On mining shares over 30s .. 1£ per cent. A minimum charge of 10s on any transaction. From this you will see, Mr Herdman continued, that a very moderate scale is now in force, and in every way more favourable to clients, yet there is complaint against it. Well, we do not pay much attention to that. There are new stock exchanges threatened, open exchanges, and so forth, and if I were good at guessing I might divine the true ouarler from which the complaints emanate. 'As to other exchanges and so forth, we do not concern ourselves to any great extent with these. The public know how to conserve their own interests, and I need hardly say that the astute investor will bring his articles to the best market. He will buy and sell in the market where he has the best chances, and that market is uncontestably where the biggest business is transacted. That's the whole thing in a nutshell. Therefore, the object of my stating oair case in this way is not because auction sales and other exchanges are about to be started, but simply to let the public know that we are v/orlrng en a fair and square scale that -we carefully arranged on the most equitable basi3 we could conceive. The Reporter : How does it compare with the scale of charges obtaining in other exchanges'? Mr Herdman: Ours is, I believe, the lowest scale in New Zealand. I understand that the system of buying and selling commission obtains on the London Stock Exchange, so it would appear that we are in good company. The Reporter : And what is the practice elsewhere about the division of the commission between buyer and bioker? Mr Herdman: The jn-actice is to divide the commission between buyer and seller, each, broker being entitled to charge his commission, and, as I said before, not only did that always exist here, but it is much the fairest. As things are now, clients can see exactly the prices they pay for their stock, and the exact amount charged for commission. The Reporter: There are some who say the minimum charge is too high. Mr Heidman : The minimum charge quoted is ]os, but brokers, if they please, may charge 7s 6d. I read accounts of how people bought shires and sold them again, and losing on the transaction. But surely we cannot help that. If people buy shares and sell them immediately for a premium not large enough 'even to cover the commission, necessarily the broker is not to blame. If a client, makes a bad investment the broker should not be asked to bear the cost by forgoing his charges and giving his services free. He places Ins time at his client's disposal, he lias an office and staff to keep up, he pays for his seat in the exchange, and yet there aic people who say he should place all that at their disposal free of charge when they want to buy shares. As I said before, the fair-minded portion of the public will see, and do see, the inequity of such a thing, and all I want now to do is to lay our case before those whs might be led away with the assertions which I really think emanate from interested quarters.

The reporter then thanked Mr Herdman ancT withdrew. <