Taipei Securities Dealers Association's application for permission to engage in concerted actions in connection with its self-regulation rules which provide for discounted commission available only to investors whose transaction value exceeds NT$ 100 million per account on a monthly basis
Chinese Taipei
Case:
Taipei Securities Dealers Association's application for permission to engage in concerted actions in connection with its self-regulation rules which provide for discounted commission available only to investors whose transaction value exceeds NT$ 100 million per account on a monthly basis
Key Words:
stock exchange commission, trade association, concerted actions, efficiency competition
Reference:
Fair Trade Commission Decision of 20 August 1997 (the 303rd Commission Meetings); Letter (86) Kung Yi Tzu No. 8607087-001
Industry:
Securities Dealers (6611)
Relevant Laws:
Summary:
1. With regard to securities dealers' collection of stock exchange commission from their clients, the competent authority in charge of such issues, Securities and Exchange Commission of the Ministry of Finance [hereinafter referred to as the "SEC"], in a ruling letter directing that securities dealers may determine by themselves the criteria for commission discount based on business considerations. However, with various criteria developed by different securities dealers, undue and malicious competition might occur among members of the same trade. In order to enhance its members' self-discipline, the Taipei Securities Dealers Association [hereinafter referred to as the "Association"] in its 18th Board Meeting held on 23 May 1997 developed Self-regulation Rules for Commission Discount on Sales of Marketable Securities Entrusted by Customers [the "Rules for Discounted Commission"] by which its members could only offer discounted commission in terms of monthly transaction volume and each fixed accounts. The Rules only allow discount for each account of monthly transaction volume exceeding NT$ 100 million, and the discount rate would be determined by securities dealers and their clients. Accordingly, the Association filed an application to the Commission for permission to engage in concerted actions on the grounds that the said situation should be deemed an exception to the prohibition on concerted actions.
2. The current stock exchange commission rate is determined in accordance with the provisions of Article 85(1) of the Securities Exchange Law, that is, the commission rates on each account's daily transaction value is based on a five-tier progressive decrease scheme with the ceiling rate being 0.1425%. Pursuant to the provisions of Article 46(1) of the Fair Trade Law, the said situation shall be exempt from the Fair Trade Law. However, even under the current commission rate system, the SEC agrees that securities dealers may determine the discount rates if they decide to charge their clients with less commission due to business considerations, and such charge criteria shall be made public and apply to all of their clients. Therefore, the SEC seems to acknowledge the fact that in this particular market securities dealers in addition to trying to attract more customers with better service quality may also compete with one another in terms of commission rates.
3. The Rules for Commission Discount developed by the Association provide that discounts on commission are only available to those each of accounts whose transaction value per month exceeds NT$ 100 million. Such a rule seems to be a distortion of the aforesaid commission criteria. Though it aims to prevent securities dealers from competing with one another by undercutting commission rates, there does not seem to be a need for them to set such rules that restrain each other in relation to discount rates as long as the securities dealers can attract customers with more favorable terms under a reasonable rate system, and give full play to efficiency competition. Therefore, the content of the Rules for Commission Discount developed by the Association as one of the resolutions of its board meeting may inhibit the function of market mechanism, which is in violation of Article 14 of the Law; nor does it meet the requirements for permissions to be granted to concerted actions, so no permission shall be given to the application in question.
Summarized by Chen, Yun-shan
Supervised by Hu, Kuang-Yu
**: For information of translation, click here
[Browse by APEC Member
Economies] [Browse by Subject Categories] [Home]
[Decisions] [Approvals] [Interpretations] [Administrative Guidance]