— Lower trading fees to be matched by higher Central Registry fees
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The Cyprus Stock Exchange (CSE) has embarked on a new round of negotiations with its members and listed companies before the announcement and implementation of its new pricing policy, which aims to compete head on with the competition from other exchanges, including the Athens Stock Exchange and at the same time prepare the Exchange to meet the challenges from the introduction of the MiFID rules.
A senior CSE spokesman told the Financial Mirror that the change in pricing structure essentially means that the CSE will reduce its transaction fees, to bring them to the same level as those charged by the Athens Stock Exchange, while at the same time increase the central registry rates, which is also how the ASE makes its pricing.
Until now the CSE used to charge its members (brokers or financial services firms known in Greek as KEPEY) a total of 0.085% per every trade, whether on a purchase or a sale.
A CSE official explained to the Financial Mirror that the 0.085% fee represents 0.04% for membership fees, 0.005% provided the transaction by the broker is booked through the ODL system and 0.010% as stock market transaction fee. The total amounts to 0.055%, on top of which the CSE charges 0.03% as its Central Registry fees for a total of 0.085% per every trade.
Now the CSE wants to reduce the total fee to 0.04%, to bring it in line with the ASE rate, which recently was reduced to 0.04%. Such a dramatic reduction in rates however, would play havoc with the CSE’s annual budget, which is why the CSE wants to increase the Central Registry rates that it charges.
The CSE maintains that it needs at least a daily volume of EUR 25 mln with the reduced rate structure to break even. In an effort to win over its members it has promised to introduce a “cash rebate†scheme, whereby for any additional money made over and above its break-even point, it will return the excess to the brokers.
The KEPEY, meanwhile, have rejected the new policy structure, and while they want the CSE to reduce its transaction rates to the level of the ASE, they don’t want the Central Registry rates to be increased.
A new meeting has been scheduled between the two sides, which will hopefully lead to an agreement so that the new pricing policy can be introduced from January 1, 2008.
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— High Central Registry costs
By increasing the Central Registry rates, the CSE also wishes to be ready to accommodate any interest by major European trading platforms to trade Cyprus stocks, after which the clearance and settlement will be entrusted with the CSE if by the implementation of the MiFID rules, there is interest to trade in Cyprus stocks.
“The CSE has realized that since it cannot hope to become a privatized entity to compete head-on with the likes of the ASE, which is in private hands and is listed on the ASE itself, then the only other alternative is to boost the Central Registry services, where there may be a competitive advantage,†a market monitor with knowledge of the new developments told the Financial Mirror.
The fact that the CSE cannot undercut the ASE prices also means that its best strategy is to keep the same trading prices as those charged in Athens, otherwise risk a massive exodus of trading to the ASE and in future to other trading platforms when as a result of the implementation of the MiFID rules, such platforms are developed.
Another alternative would be to charge the public for maintaining a CSE Global Account. There are currently about 310.000 Global Accounts, which the CSE does not charge.
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All options are open as one CSE official told the Financial Mirror, which means that most probably, investors should brace for lower trading fees, but higher fees at the Central Registry.
