ASCM time-out on poaching of remisiers

KUALA LUMPUR: Contrary to the initial belief that online trading would bring about the demise of remisiers, high-flyers are being wooed with everything from cash to the promise of 100% share of broking fees in the first year to an exclusive wine and dine session with a feng shui master.

Poaching by the deeper-pocketed stockbroking firms to gain retail market share has become so rampant that the Association of Stockbroking Companies Malaysia (ASCM) has found it necessary to impose a six-month moratorium on remisier transfers until a compensation mechanism for the losing firm is worked out, sources said.

“It’s just like how Bursa [Securities] designated Harvest Court [Industries Bhd] when things got out of hand. I was a remisier myself, and I don’t agree with some of the things that have been happening,” a source with a small local brokerage said. “The ASCM met on Nov 18 and agreed there was a need to call a time-out to return some stability to the industry,” the source said.

The ASCM had yet to respond to a request for comment from The Edge Financial Daily at press time. However, Datuk Saiful Bahri Zainuddin, its past chairman, has said there was a need to curb excessive pinching, which took flight after stockbroking firms were freed to give remisiers bigger chunks of brokerage commissions when a 40% cap was removed effective January this year. The ASCM has long recommended that a “transfer fee” be imposed on remisiers who leave to join a rival firm, with the amount payable to the losing brokerage house calculated based on the remisier’s commission income.

“The moratorium took effect from Nov 18 for six months, or until a resolution on a transfer mechanism is instituted by the ASCM,” the source said.

The moratorium is said to have incurred the ire of a number of remisiers, who feel their opportunities to find greener pastures are being unfairly taken away. “It was a very emotional at the [ASCM members] meeting. They should just leave things to market forces,” one remisier said.

To be sure, the carrots and glitzy advertisements look hard to resist. ECM Libra Investment Bank Bhd, for instance, marked the launch of the “Libra Elite” club last Friday at its headquarters in Damansara Heights by inviting all card-carrying remisiers to an evening with feng shui grandmaster Yap Cheng Hai who spoke on “How to be a successful remisier in 2012”. Libra Elite is advertised as “an ultimate premium service for high achieving remisiers”.

ECM Libra isn’t the only aggressive one, market watchers said. CIMB Group Holdings Bhd CEO Datuk Seri Nazir Razak has reportedly attributed part of the group’s growing strength in retail trading to a good group of remisiers and dealers whom customers trust.

Whatever CIMB’s recipe for success is, CIMB Investment Bank has the largest market share of the total value of stocks traded. For the first 10 months of 2011, some RM79.3 billion worth of stocks traded on Bursa Malaysia went through CIMB, giving it a 10.4% market share, data on Bursa Malaysia’s website shows.

That is significantly higher than the 9.75% market share it had for the 10 months ended Oct 31, 2009, which was worth only RM49.7 billion back then, though it is likely that CIMB’s numbers are also exemplified by its sizeable institutional trading activities.

OSK, with the largest base of remisiers, is the leader in terms of total volume traded, but has seen its market share in terms of value traded decline over the same two-year period (see table).

Interestingly, Sam Ng, president of The Association of Remisiers Malaysia (Persama), isn’t fuming over ASCM’s decision on the moratorium. “I agree [with the ASCM] there is a need for [remisier transfers] to be done in a fair and orderly manner,” Ng told The Edge Financial Daily.

“I’m not saying ASCM is right to stop people from getting a better deal, but I believe there is a need for everyone to take a step back and think things through because there are potential longer-term implications [of the rampant poaching],” Ng said. Having been a remisier himself for some 20 years, the Johor-based Ng said fellow remisiers should agree to the time-out and work out a fair mechanism for transfers.

“Who are offering the big rewards, the cash? Big firms, correct? Do these big banks not have online banking facilities? Do they cost nothing to operate that they can give remisiers 100% share of fees instead of 50% to 60%? Will smaller broking houses survive if the poaching goes on? Will remisiers still be wooed the same way when there are only big players left?” Ng replied when asked to spell out the issues remisiers should sort out instead of fighting the moratorium. “Just look at what happened to the smaller players in Singapore.”