Yahoo Finance Chinese Mutual Funds Ask Bond Brokers to Lower Trading Fees
(Bloomberg) -- Some of China’s biggest mutual funds are asking bond brokers to lower their trading fees, according to people familiar with the matter.
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The funds used to pass those fees to investors, said the people, who asked not to be identified as the matter is private, but a rule from the China Securities Regulatory Commission taking effect in July has put a stop to the practice.
The funds are looking for a cut in the fees of as much as 70%, according to one person. The brokers have agreed to provide the services for free starting Monday until the parties reach an agreement, the people said.
It wasn’t immediately clear whether any changes will result from talks between the funds and brokers, the people said. Liquidity may also tighten in China’s debt market, at least in the short term, if some cost-sensitive mutual funds shy away from using brokerage services, some of the people said. At the same time, going around the brokers would likely be time-consuming and inefficient.
CSRC wants to reduce bond trading costs and regulate funds’ operations, as China pushes to make trading less expensive. A recent cut in commissions that mutual funds pay for stock transactions is expected to save investors about 20 billion yuan ($2.8 billion) annually, Shanghai Securities News reported in April, without saying where it got the data.
China has six major brokers that facilitate fixed-income market transactions by offering intermediary services such as price quotes and helping identify buyers and sellers. Tullett Prebon Sitico (China) Ltd., one of the biggest, has already seen profits decline. The broker reported 371 million yuan of net profit in 2023, down 20% from the previous year, according to a copy of the broker’s audit report seen by Bloomberg.
Tullett Prebon Sitico (China), Ping An Tradition International Money Broking Company Ltd., Ueda Yagi Money Broking (China) Co., China Credit BGC Money Broking Co., CITIC Central Tanshi Money Brokering Co. and Shanghai CFETS-NEX International Money Broking Co., the six brokers, didn’t immediately reply to requests for comment. The CSRC also didn’t immediately respond to a request for comment.
Some mutual funds are also asking securities firms for a lower commission rate for stock trading in public equity funds, which was among the new rules published in April.
--With assistance from Zhang Dingmin and Qingqi She.
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