HomeBusinessZim stockbrokers feel the heat as low liquidity bites

Zim stockbrokers feel the heat as low liquidity bites

Stockbrokers derive their income from the 1% commission levied on the buying and selling of shares.

Other than the 1% commission, there is a fixed charge of US$2 per transaction, but when it also involves  advisory work, brokers also charge to get some income.

Stockbrokers who spoke to Standardbusiness last week said the situation was so dire that firms were scrambling to get a slice of the small cake.
There are 20 stock broking firms on ZSE.

So serious is the situation that some have downsized their staffing levels by half, in line with the depressed business since the advent of multi-currencies in 2009.

Although the market share sometimes changes, depending on the number of deals, the top seven brokers control over 70% of the market, leaving the remainder to scramble for the crumbs.

“If a broker gets one big deal per half year worth, say, over US$100 000, that broker would be alright for just that half year,” a source said.

Players said if liquidity improved there would be more activity on the bourse and more commission.

“Improved liquidity, efficiency in the market in terms of electronic  trading and depth, in terms of value and volumes exchanging hands, would make the brokers happier,” a broker said on Friday.

Are there too many brokers for our relatively small market? — Players  in the field have divergent views.

“It’s not really the case but there is need for some innovation like derivatives introduction which increases depth,” one broker said.

“The debate is the same as asking whether Zimbabwe is overbanked or not. It depends on innovation.”

Another broker said: “The number of brokers is more versus the volume of business available on the market, considering that it cannot be shared equally.”

Most of the brokers told Standardbusiness that the commission was “okay” but condemned other charges which they said were too high. There is the 1% brokerage fee, 0,18% SEC levy, 0,25% stamp duty and VAT, at 15% of brokerage.

“There are too many charges which scare away foreign investors,” another source said.

Unlike other sectors like banking, stock- brokers operate in an environment with legislated charges, hence they get the same commission. Banks on the other hand do not offer the same interest rates.

As such, stockbroking firms have to compete for the same customers in a bid to increase volumes and ultimately incomes. This means that the personality of the brokers or the owners holds sway. Personal relationships and networking can also drive volumes in a congested market.
In addition, if brokers have foreign clients in their books, they are bound to generate more income.

Foreign investors are the major players on the ZSE owing to liquidity constraints affecting mostly locally registered companies.

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