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Exchange fees to hit investors

EXCESSIVE fees charged for membership and transact-ions on the Cambodia Securities Exchange risk becoming a barrier to participation, given the CSX’s planned measured start, securities firms say.

Officials say the fees are necessary to run the planned exchange, but some firms claim high costs will ultimately be shouldered by investors.

“The CSX should think about the issue, considering this is a new and small market,”  Zhang Yun Feng, the director of  Golden Fortune Cambodia Securities, said.

“If they don’t reduce these fees, they will put the burden on investors, because we will be forced to charge higher commissions to maintain our business.”

The CSX held a meeting in March at which it asked local operators for feedback on its proposed rules and fees, but CAB Securities’ Preap Kim Chhun said CSX officials had not budged on pricing since then.

“The fees haven’t changed in the finalised rules, despite our suggestions that they be reduced,” he said.

Market players will be charged various fees for transactions or operations on the CSX.

Members will pay 20 million riel (US$5,000) every two or three years, and a fee of 0.25 per cent on the total value of each trade. The  exchange is scheduled to launch on July 11.

But representatives of the three state-owned enterprises publicly tapped to list – Telecom Cambodia, the Phnom Penh Water Supply Authority and Sihanoukville Autonomous Port – have said they will not be ready for listing until later in the year.

A total of 13 firms have been licensed to operate as underwriters, dealers or brokers on the exchange.

Preap Kim Chhun said he was not sure whether CAB would apply for membership of the CSX, as partnering with other firms might result in  lower costs.

CAB has been licensed as a broker, allowing it to buy and sell securities on behalf of clients for a commission.

Despite this, Golden Fortune is pushing ahead with its membership application.

“Whether we want to or not, we’re going to apply for membership because we already have a licence from the Securities and Exchange Commission of Cambodia,” Zhang Yun Feng said. "We have to run our business.”

Golden Fortune has been licensed as a dealer, meaning it can trade in securities for its own accounts.

The CSX began accepting applications late last month.

Acleda Securities director Svay Hay offered a defence of the fee structure, although he did admit that the costs would weigh on both securities firms and investors.

Regulators had approached the launch with caution, and the high prices would serve to balance what would be a limited start for the exchange, Svay Hay said.  “We think the fees are high because the number of transactions will be small, given there are only three state-owned companies listing,” he said, adding that Acleda Securities would also charge higher fees during the early stages.

“The next stage will bring reductions, when we have more companies listed and more investors trading on the bourse,” he said.

Phnom Penh Securities director Kuy Vat said  the CSX’s fees on transactions were the biggest impediment to trading.

“They’re a bit higher than in other countries,” he said.

Despite the CSX finalising its rules, Kuy Vat said he had submitted requests to the Securities and Exchange Commission of Cambodia and the CSX to reduce transaction fees.

Neither body had replied yet, he said.

Although SECC deputy director Huot Pum said fees were not the purview of the regulator, he claimed the SECC suggested exchange officials keep prices down.

“However, the CSX told me that the cost of their high-tech facilities made it impossible for them to reduce their fees,” he said.

Huot Pum also said securities firms were not required to be members of the exchange. Instead, they could  partner with members.

Even so, he warned that investors might seek out only  firms that were full members of the exchange.

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