Zero-fee tactic empowers securities firms

Wednesday, Apr 10, 2024 08:20

A trader talks to a customer at a trading office of SSI. — Photo courtesy of SSI

The age-old concept "the customer is king" is becoming more visible in the Vietnamese stock market, where more and more securities firms are aggressively lowering or even eliminating transaction fees to attract and retain customers.

At the 2023 General Meeting of Shareholders of MB Securities JSC (MBS), Lưu Trung Thái, Chairman of Military Commercial Joint Stock Bank (MB), emphasised the intense competition among securities companies, with brokerage fees approaching zero.

SSI Securities Corporation, a leading securities firm, recently announced a 12-month free transaction policy for new domestic retail investors who open accounts on April 4, without utilising SSI's consulting services.

This securities company also clarified that their free transaction programme applies exclusively to customers engaging in underlying securities trading and does not cover fees paid to stock exchanges.

SSI also waived stock trading fees for a 90-day period for customers who opened new accounts between May 15 and August 15, 2023.

VPS Securities, the current leader in stock brokerage market share, continues to offer a policy of zero-free underlying securities trading for customers who open new accounts for a period of six months.

In addition to temporary fee waivers or reductions, some companies are taking it a step further by offering lifetime transaction fee exemptions for their customers.

Earlier this year, MBS introduced a lifetime free trading policy for both underlying and derivative securities transactions for customers who open new accounts with the company and do not utilise consulting services.

Last year, the zero-fee trend in the securities industry gained significant attention.

Techcom Securities (TCBS) officially waived fees indefinitely on various securities investment activities, including stocks, derivatives, warrants and listed fund certificates.

Smaller securities companies such as DNSE Securities JSC, JB Securities Vietnam Company (JBSV) and Pinetree Securities Corporation have also implemented lifetime free incentives for customers, with durations ranging from five years.

Advantages of zero-fee strategy

As trading fees are waived or reduced, securities companies obviously experience a significant decline in brokerage revenue.

For instance, TCBS witnessed a decrease of over 46 per cent in brokerage revenue in 2023. DNSE and Pinetree also reported a decline in brokerage revenue compared to the previous year and posted losses in this segment.

JBSV's brokerage revenue was almost negligible while AIS Securities JSC saw a nearly 27 per cent decrease in brokerage revenue in 2023.

Despite the decline in brokerage revenue, the implementation of zero fees appears to be a strategic move for securities companies to compete for customers and expand their market share.

DNSE, for example, had 560,000 accounts by the end of 2023, with an average of 1,500 new accounts opened daily, capturing 26.5 per cent of the newly opened market share.

The recent initiative by SSI aligns with the objective of attracting new customers and increasing its market share. This move is particularly important as SSI's stock brokerage segment has not thrived in recent years.

After consistently holding the top position in the stock brokerage market share rankings for several years, the securities firm has slipped to second place in the past five years.

In the first quarter, SSI's brokerage market share on the Hồ Chí Minh Stock Exchange (HoSE) reached 9.32 per cent, securing the second spot in the rankings.

Experts believe that SSI and other companies adopting the zero-fee approach can leverage their new customer base to cross-sell additional products and services. One area experiencing significant growth is lending.

With the exception of AIS, securities firms implementing zero-fee policies all observed an increase in interest on loans and receivables in 2023 compared to the previous year. DNSE, in particular, witnessed a notable growth of over 28 per cent.

Loans and receivables interest have become a significant source of operating revenue for securities firms implementing zero-fee policies. TCBS, for instance, generated over VNĐ1.6 trillion (US$6.4 million) in interest from loans and receivables in 2023, the highest in the industry, constituting about 30 per cent of its total operating revenue.

DNSE relies heavily on interest from loans and receivables, which accounts for 40 per cent of its total operating revenue. Similarly, for Pinetree, loans and receivables interest contributes to over 55 per cent of its revenue.

These figures are expected to continue rising in the future, thanks to the substantial lending opportunities available to securities companies. — VNS

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