Dubai: Brokerages in the UAE are poised to see income decline as the country’s market regulator lowers their share of trading commissions.
The Securities and Commodities Authority plans to reduce the amount brokerages receive by almost 17 per cent, according to a statement on its website. The change is intended to encourage firms to become “full-fledged financial institutions,” according to SCA’s acting Chief Executive Officer Obaid Al Za’abi.
“After a decade of supporting brokerage firms, SCA believes that brokerage firms should upgrade to be full-fledged financial institutions, thus their major income should come from those professional services,” Al Za’abi said by email. The adjustment will take effect after publication in the official gazette, he said, without providing further details.
The move is another blow to stock brokers in the Arab world’s second-biggest economy, which has been buffeted by a plunge in the price of oil, a key source of income for governments in the six-nation Gulf Cooperation Council. Dubai’s benchmark stock index has retreated 20 per cent in the past year, and Abu Dhabi’s has dropped 10 per cent.
While the commission charged per transaction remains unchanged for investors at 0.00275 per cent, the brokers’ portion will be reduced to 0.00125 per cent from 0.0015 per cent. SCA’s share will be 0.0005 per cent.
“Nothing is going to change for retail individuals, but for the global sell side brokers it is going to make a difference,” said Nabil Rantisi, managing director of Abu Dhabi-based Mena Corp. Financial Services, one of the U.A.E.’s biggest brokerages. “In the short run it will impact our revenues by 20 per cent immediately.”