Securities houses ask regulators
for relief from transaction
charges and VAT

Securities companies are requesting stock market regulators and the government to consider cutting transaction fees and taxes to help them stay afloat after being hit increasingly hard in recent months by the negative impact on trading of the deepening global economic crisis.

Such measures would help the industry to weather the storm as orders plunged, Trimegah Securities president director Aviyasa Dwipayana told The Jakarta Post recently.

“The policy will surely bring a positive contribution to the industry,” he said.

According to existing regulations, brokers are required to pay a 0.04 percent fee per transaction to the Indonesia Stock Exchange (IDX). and another 10 percent value-added tax (VAT) on each transaction.

Any reduction in these costs would help the securities houses significantly when the daily volume of transaction values has dropped by almost 75 percent since the second half of last year.

The latest IDX data has showed that 108 out of 121 securities companies listed as members of the IDX have suffered a  steep decline in transactions, with 73 of them recording a 50 percent drop between September 2008 and January 2009.

In September last year, the securities houses managed to log total transactions worth Rp 145 trillion (US$12 billion) before plunging to  less than half of that , down to Rp 62 trillion in January this year.

In addition, most companies have also been pulled down by financial losses resulting from a chain of repo transactions.

A repo, or repurchasing agreement, is a borrowing mechanism by which debtors put up securities, which can be stakes in companies, as the collateral to creditors, and then purchase the stakes back later on.

These  types of transactions have already taken a toll on several companies, which have therefore been cutting  cutting their staff.

Trimegah, for example, discharged 40 workers last year from its total 400 work force.

Lily Widjaya, chairwoman of the Association of Indonesian Securities Companies (APEI) said the government should immediately come up with concerted policies, including tax and fee cuts, to help securities houses survive these hard times.

In response to these requests, IDX president director Erry Firmansyah said that it would be difficult for the regulator to cut the transaction fee because the IDX was basically in the same boat as the securities companies (on falling revenue).

“We will see what we can do about it. If we grant it, we should see how the IDX could survive a revenue decline at a time when stock transactions are sluggish,” he said.

The Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) has also voiced its reservations about helping the securities houses obtain a tax cut.

Bapepam has instead renewed calls for securities companies to merge and consolidate to create stronger and healthier companies.

Analysts believe the country’s stock market has been too crowded with 121 operational securities companies, of which only 116 are now still active in the trading floor, indicating the need to consolidate.

The Jakarta Composite Index  (JCI) gained 1.1 percent higher or 13.52 points to 1,300.21 in thin trading on Tuesday.

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