SEC scraps minimum stockbroker commission

MANILA, Philippines — In its continuing efforts to boost capital market activity, the Securities and Exchange Commission (SEC) has removed the minimum amount of commission that stockbrokers may charge their customers.

The SEC issued on April 16 a memorandum circular providing for the removal of the minimum commission charged by Philippine Stock Exchange (PSE) stockbrokers.

With the new rule, brokers are allowed to set their own commission schedule for transactions with their customers, without the limitations of a prescribed regulatory minimum commission.

“Lower transaction costs are vital in encouraging the public to invest their money in the stock market. The removal of the minimum stockbroker’s commission seeks to address this, and hopefully bring out more retail investors and spur trading activity,” SEC chairperson Emilio Aquino said.

The SEC, through a 1977 resolution, previously set the broker’s commission at 1.5 percent.

Guidelines issued by the PSE, meanwhile, prescribed a minimum commission ranging from 0.25 percent to 0.05 percent of the value of a trade transaction.

The removal of the minimum commission is seen helping spur trading in the stock market, in line with other recent reforms implemented to boost the capital market.

The SEC also sees the new rule helping empower the investing public to engage the services of a broker of their choice based on cost preference.

The SEC said the removal of the minimum commission takes into account the rise of online trading platforms, which have paved the way to more cost-efficient transactions.

The commission also took cues from other neighboring jurisdictions, which do not prescribe a minimum stockbroker’s commission.

Aquino said the SEC would continue to review existing rules and regulations to see areas where it can make improvements to achieve the goal of boosting the capital market.

Last year, the SEC approved the shorter settlement cycle of T+2 from T+3, allowing investors to receive proceeds from securities trades within two days instead of three and has also effectively reduced risk exposure for trading participants by one day.

The SEC in 2023 likewise approved the PSE’s application for exemptive relief in relation to its merger with the Philippine Dealing System Holdings Corp., which is expected to create synergies and efficiencies in favor of capital market participants.

Recently, the SEC signed a partnership agreement with the University of the Philippines Law Center to foster capital market development through capacity building and policy research analysis.