FE Report (March 01, 2011)
Most brokerage firms are burdened with huge establishment cost amid bearish trend continuing in the last three months in the stock market.
Market insiders said as market grew substantially in terms of index and turnover in the last two years, brokerage firms expanded aggressively by opening branch offices even at the thana level. Some of the brokerage firms even opened up to 15 branches, in addition to the extension of offices to satisfy the whimsical response of the investors to the stock market.
"Just three months ago we used to have daily turnover of Tk 30 billion, now it has come down to 5 billion which ultimately slashed our income from the trading commission drastically," said a leading broker.
Trading Commissions account for the largest income source of the brokerage firms. They took trading commission charge at the rate of 0.3 per cent to 1 per cent in every trading from the client. Besides, brokerage firms took BO maintenance fee from their clients.
Chief Executive officer of Azam Securities Limited, Md. Rezaul Kibria said, even two months back we used to trade Tk 450 million daily, now the daily turnover has come down to Tk 80 million which means substantial fall in the income.
"With the expansion of the capital market we have appointed a large number of manpower, installed computer services and other expensive office equipments. Those seem to be big burden on the brokerage firms now," he said.
Another broker, on condition of anonymity said, "If the situation continues this way it will be very difficult to survive with the large cost of establishment" adding that many young professionals are leaving the field due to the persistent uncertainty of the stock market.
According to DSE, the minimum cost to establish one branch office of a brokerage firms is Tk 1.00 million to 1.5 million. With salary and house rent monthly charge for a branch office comes to at least Tk 0.1 million.
Managing Director of Fakhrul Islam Securities Ltd, Md. Fakhrul Islam told FE that since bearish trends continue in the market the amount of income is far less than the cost in a brokerage house. We have to bear the cost for salary and house rent on monthly basis, although income source is uncertain.
"I am not considering closing any branch at this point, but if the situation continues in this way I may be forced to take the hard decision, said Fakhrul, who operates 13 branches throughout the country.
Apart from branch offices, brokerage house also has extension offices. The office which is situated within 2 kilometres of the head office is considered as the extension office of a brokerage house and beyond that limit considered as the branch office.
According to available information, 238 members of DSE are operating 634 branches across the country.
Recently capital market regulator Securities and Exchange Commission (SEC) directed brokerage house not to open new branches until further order.
Most brokerage firms are burdened with huge establishment cost amid bearish trend continuing in the last three months in the stock market.
Market insiders said as market grew substantially in terms of index and turnover in the last two years, brokerage firms expanded aggressively by opening branch offices even at the thana level. Some of the brokerage firms even opened up to 15 branches, in addition to the extension of offices to satisfy the whimsical response of the investors to the stock market.
"Just three months ago we used to have daily turnover of Tk 30 billion, now it has come down to 5 billion which ultimately slashed our income from the trading commission drastically," said a leading broker.
Trading Commissions account for the largest income source of the brokerage firms. They took trading commission charge at the rate of 0.3 per cent to 1 per cent in every trading from the client. Besides, brokerage firms took BO maintenance fee from their clients.
Chief Executive officer of Azam Securities Limited, Md. Rezaul Kibria said, even two months back we used to trade Tk 450 million daily, now the daily turnover has come down to Tk 80 million which means substantial fall in the income.
"With the expansion of the capital market we have appointed a large number of manpower, installed computer services and other expensive office equipments. Those seem to be big burden on the brokerage firms now," he said.
Another broker, on condition of anonymity said, "If the situation continues this way it will be very difficult to survive with the large cost of establishment" adding that many young professionals are leaving the field due to the persistent uncertainty of the stock market.
According to DSE, the minimum cost to establish one branch office of a brokerage firms is Tk 1.00 million to 1.5 million. With salary and house rent monthly charge for a branch office comes to at least Tk 0.1 million.
Managing Director of Fakhrul Islam Securities Ltd, Md. Fakhrul Islam told FE that since bearish trends continue in the market the amount of income is far less than the cost in a brokerage house. We have to bear the cost for salary and house rent on monthly basis, although income source is uncertain.
"I am not considering closing any branch at this point, but if the situation continues in this way I may be forced to take the hard decision, said Fakhrul, who operates 13 branches throughout the country.
Apart from branch offices, brokerage house also has extension offices. The office which is situated within 2 kilometres of the head office is considered as the extension office of a brokerage house and beyond that limit considered as the branch office.
According to available information, 238 members of DSE are operating 634 branches across the country.
Recently capital market regulator Securities and Exchange Commission (SEC) directed brokerage house not to open new branches until further order.
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