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Chairman’s Report (2012 - 2013) by Mr Oliver Ng

Date : 2013-10-09

 

I am pleased to present my report on The Hong Kong Association of Online Brokers Limited (“HKAOB”). Forthe period of 2012to2013, I represented BOCI Securities Limited and served as Chairman.

During theperiod, our industry continued to face numerous challenges stemming from; poor investor sentiments, intense competitions from Banks, increased operating and compliance costs.

The poor investor sentiment was reflected in the average daily turnover as it was HK$55 billion for the past 12 months (September 2012 to August 2013) versus HK$54.4 billion in the same corresponding 12 months for the year of 2011 to 2012. Although there were glimmer of hopes at the beginning of this year as the average daily turnover in the First Quarter was above HK$70 billion. However that optimism was short lived as external factors had again suppressed investors’ appetite for equities.

In the face of the low turnover, price competition has become more intensive as Banks are also in the foray and have acted aggressively. Some Banks have offered deep discounted commission rates on trading Hong Kong stocks to attract new customers. As a result, Brokers are now facing even stiffer competition as Banks have natural advantage by way of their ability to access lower funding cost and cash deposits of their customers.

While Brokers can adapt to poor investor sentiments and heighten competition from Banks as they are often short term and cyclical, our biggest challenge is to deal with a whole host of regulatory changes from the fall out of Lehman Mini-bonds fiasco. Our Regulators have introduced new rules and regulations riding on the premise of customer protection but putting greater responsibility on the Brokers. Consequently, Compliance cost has gone up significantly.

While the challenging environment might seemed insurmountable, HKAOB and its members remained steadfast and persistence in seeking a level playing field to ensure Brokers will remain a force in maintaining Hong Kong as a major financial centre. In fact, Retail Brokerages in Hong Kong will continue to thrive once restrictions are gradually relaxed by PRC authorities and individual investors are allowed to invest in overseas markets. As a result, HKAOB has been vocal in lobbying SFC to consider making enhancements on; a) non-face to face account opening regulations; b) introduce mechanism where Exchange Participants are offered opportunity assess the reasonableness of fees, current or new, being levied by HKEx as it operates as monopoly. As the prospect of the Online Brokers is highly dependent on the ability to acquire new accounts from Overseas and PRC in particular, therefore it is imperative that our industry must keep pace with changing technology and market structure.

In the past 2 years, HKAOB has continued to join force with all 7 other securities and precious metals associations, namely : Hong Kong Securities Association, The Institute of Securities Dealers, Chinese Securities Association, Hong Kong Securities Professional Association, Hong Kong Securities and Futures Professional Association, HK Institute of Financial Analysts and Professional Commentators and Hong Kong Precious Metals Traders Association to show our solidarity and to express our views and concerns to the SFC, HKEX andHon Cheung Wah Fung, Legislative Councilor

During the period of 2012/2013, HKAOB conducted the following activities to fulfill the objectives of the Association:

1.   Responded to various market consultations and discussions issued by HKEx, SFC, Financial Services and the Treasury Bureau and Chief Executive, Mr. C Y Leung. The most significant ones include:

a.   Submission to Chief Executive Mr. C Y Leung for two-tiered commission schedule

b.   Consultation Paper on Proposed Amendments to the Professional Investor Regime and the Client Agreement Requirements

c.   Consultation Paper on regulation of Electronic Trading

d.   Consultation on Trading Halts

e.   Submission to HKEx relating to After-Hours Futures Trading

f.    Discussion with SFC on IT control review of Internet Brokers

g.   Discussion with SFC on the work of Process Review Panel

2.   Participated in various meetings/functions held by market regulators and industry organizations, including:

a.   Regular meetings with SFC and HKEx

b.   Meeting with HKEx on Migration of HKATS to Genium INET Platform

c.   Meeting with SFC to review non-face to face account opening regulation and guideline

d.   Regular industry practitioners meetings organized by Hon Cheung Wah Fung, Legislative Councilor

e.   Monthly luncheon with 7 others securities associations

f.    Hong Kong Securities Delegation visiting Guangdong Securities Association

g.   2013 Chinese New Year Cocktail

3.   Other activities:

a.   Workshop on computer crime prevention presented by Hong Kong Police Force, Technology Crime Division

b.   Sharing of views on Third Party Clearing with Dion Global Solutions and Pershing Securities

Our membership currently stands at 23 with 20 Full Members and 3 Associate Members. Looking forward, as Online Trading has evolved to include mobile devices such as Smartphone and Tablet Computer; HKAOB will continue to collaborate with other market participants and stakeholders to promote healthy development of Online Trading. In closing, I would like to express my deepest gratitude to all the members for their unwavering support and guidance in contributing to the success of HKAOB.

Oliver Ng

Chairman

 

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