Karachi November 8 2021: Pakistan Stock Exchange is proposing to carry out amendments to PSX Regulations to prescribe reduced minimum brokerage commission for Fixed Income Exchange Traded Funds (ETF).
The standard rate of brokerage commission is higher of ‘3 paisa per share’ or ‘0.15% of the transaction value’ on every buy and sell transaction which is not squared during the same trading day or only on one side which is squared-off during the same trading day. The same rate of brokerage commission is also applicable on ETF.
A L S O || R E A D
Pak Agro Packaging IPO Oversubscribed By 1.85x: PSX
It is important to mention that there are some inherent features of fixed income ETF which distinguish it from equity class ETF, such as the upside potential of equity class ETF is significantly higher than that of fixed income ETF as a stock may hit the upper cap of circuit breaker in a trading day but T-Bills/ PIBs are least likely to show much volatility, particularly when the interest rates are at low level.
Moreover, the current impact of brokerage commission of 0.3% (on both buy & sell sides combined) on a non-intraday trade will bound the investors to hold the units of fixed income ETF for at least 2 weeks (assuming an annual return of 8%) just to reach the break-even.
Moreover, it has also been observed in other jurisdictions that the exchanges have either temporarily waived off trading fees for fixed income ETFs or prescribed lower trading fees for fixed income ETF compared to equity class ETF.
A L S O || R E A D
FFBL Increases DAP Price by PKR440 per bag to PKR7,850/bag
In view of the above and in order to promote acceptability and marketability of fixed income ETFs as a viable investment option for investors, it is considered important to have a different structure of minimum brokerage commission for both classes of ETFs.
Accordingly, PSX is proposing to reduce brokerage commission for fixed income ETF to ‘1 paisa per share’ or ‘0.01 % of the transaction value’, whichever is higher.
