JAPAN - As Japanese institutions squeeze at the margins for profits in a struggling market, commission rates continue to decline, though there are signs that may change, according to a recent study by Greenwich Associates.
For all institutions investing in Japanese stocks, the average brokerage commission rate has fallen from 17 basis points (bps) in 2001 to 14 bps this year. For foreign subsidiaries and offshore institutions, the rate has fallen from 18 bps to 14 bps.
For the largest institutions - those with commission volume of ¥1bn and more - the average is down even further from 15 bps to just 12 bps.
Additionally, 59% of institutional investors in Japan (including 70% of the largest) are now putting caps on brokerage commissions - paying on a negotiated per-bargain rate which is generally set at a very low level.
Although this points to increasing pressure on brokerage commission rates, Greenwich Associates studies also reveal some indications that they may be reversing course.
Overall, institutional investors in Japan are expecting average rates to rise from 14 bps to 15 bps in the course of the next year, with foreign subsidiaries and offshore organisations expecting exactly the same upward shift, and the largest institutions anticipating an increase from 12 bps to 13 bps.
“Given that Japanese equity commission rates are now the lowest in the world, this is not too surprising,” said Greenwich Associates consultant John Webster.
Domestic equity commission rates in the United States are at the 15-bps level, which is also the rate in the United Kingdom leaving Japan, for the moment, below the other largest markets.
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