The Stockbroker’s Dilemma: When Brokers Miss Out and Traders Get Lazy.

On a positive note, most of the leading securities companies still managed to generate gross profits from brokerage activities in the third quarter. Out of the eight securities companies with brokerage revenue exceeding VND 100 billion, only Mirae Asset incurred a gross loss. The gross profit margin varied significantly among companies due to different development strategies and commission policies. However, most of the leading securities companies in terms of market share maintained a higher gross profit margin in the brokerage segment than the industry average, particularly HSC (22%), VNDirect (35%), and TCBS (57%).

Intensifying Competition

The shrinking gross profit margin reflects the intensifying competition as securities companies engage in a race to waive or reduce fees to capture market share. To attract investors and retain customers, most securities companies have lowered their transaction fees to some extent. The majority of securities companies now charge a fee of around 0.1-0.15% (including the fee payable to the Stock Exchange). Some have even gone as far as offering a “zero-fee” policy for life, such as TCBS, Pinetree, DNSE, and MBS.

Additionally, securities companies bear numerous expenses related to this business, which erodes their profits. In reality, many securities companies still adhere to the traditional brokerage model, and the commissions paid to their brokers are substantial. Nonetheless, the non-human brokerage model is gaining traction, particularly among newer securities companies.

While strategies differ, it is undeniable that the brokerage business remains crucial to the operations of securities companies. The benefits derived from a quality customer base can far exceed the revenue from standard transaction fees, especially in driving margin lending. Furthermore, a large customer base from brokerage activities facilitates cross-selling of various products and services, such as margin lending, consulting, asset management, bonds, and fund certificates, generating significant profits for securities companies.

With the upcoming effectiveness of Circular No. 68/2024/TT-BTC from November 2, which allows foreign institutional investors to place buy orders for stocks without requiring sufficient funds, the market share pie could expand significantly as foreign transactions become more flexible. In the future, Vietnam’s securities market is expected to attract billions of dollars in foreign capital if it achieves an upgrade. This will present a new target for securities companies in their race for market share.