Bourse operator may cut trading fees

Korea’s bourse operator and related agencies are mulling reducing their stock transaction fees in a move that could help investors save costs, according to officials yesterday.

Spokespeople at the Korea Exchange (KRX) and the Korea Securities Depository (KSD) confirmed yesterday that the organizations are reviewing lowering the commissions they charge brokerages for stock transactions initiated by an investor. However, they rebutted news reports that the cuts will be around 10 percent, adding that they might not be carried out in the first half of the year.

“We have been considering making changes to our commission structure for some time, but the discussions have not progressed to the point of specifying the exact size for the cuts, or a prospective date,” said Won Yong-joon, a spokesperson for the KRX.

The commission rates that the KRX and KSD charges brokerages for stock transactions have stood unchanged at 0.28 basis points and 0.13 basis points, respectively, since the start of 2010.

However, the state Board of Audit and Inspection has been pushing for these “public institutions” to cut their commissions since it released a report in March 2010.

The report pointed out that “in 2008, the amount of commissions charged had jumped 120 times from 1980” due to an explosive growth in stock transactions that more than compensated for the organizations’ fee cuts.

“[The KRX and KSD] are maintaining monopolistic positions so they can carry out their main functions and operations ... the reason for converting the KRX into a corporation was not to seek profits, as is the case with private corporations, but was solely to bolster benefits for users through more efficient management led by shareholders’ observations and market competition,” it said in the report.

In a meeting with regulatory officials yesterday morning, Financial Services Commission Chairman Kim Seok-dong also said that regulators should monitor whether such fees are reasonable given the agencies’ monopolistic positions.

Citing unnamed sources, Yonhap reported that the KRX, KSD and similar organizations governing stock transactions are mulling a new method of differentiating their commission rates.

Under the new system, the rates would depend on the size of the transactions, rather than the current flat rate, with brokerages that deal with more transactions being entitled to lower commissions.

If carried out, major brokerages that handle transactions in bulk are likely to receive lower rates than mid-sized brokerages with a limited clientele.

By Lee Jung-yoon [joyce@joongang.co.kr]