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Eight Major Brokerage Houses See Nine Point Decline
Brokerage Market Share
Eight Major Brokerage Houses See Nine Point Decline
  • By matthew
  • August 19, 2013, 07:20
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Major brokerage houses in Korea saw dramatic drops in brokerage market share over the past four years. The only exception was Kiwoom Securities, which saw its market share sharply increase to 15% from around 10% four years ago.

According to reports released by the Financial Supervisory Service on August 14, brokerage market share by the eight major brokerage houses (KDB Daewoo Securities, Samsung Securities, Woori Investment & Securities, Korea Investment & Securities, Mirae Asset Securities, Daishin Securities, Shinhan Investment Corp., and Hyundai Securities) was at 46.6% in the fiscal year 2012. This is 8.9% points lower than the 55.5% in fiscal year 2009.

In the same period, the total brokerage fees earned also showed a sharp decline of 933.5 billion won (US$836 million, 35.09%) from 2.66 trillion won (US$2.39 billion) to 1.73 trillion won (US$1.55 billion). 

The seven brokerage houses (87.50%), excluding Korea Investment & Securities, all saw a decline in brokerage market share, albeit by different amounts.
 
KDB Daewoo Securities has seen the sharpest decline in market share over the past four years. Its market share in the fiscal year 2012 was at 6.5%, 3.7% points lower than 10.2% in fiscal year 2009. The total fees earned was more than halved (-50.59%) from 487.6 billion won (US$436.9 million) in 2009 to 240.9 billion won (US$216.0 million) in 2012.

Hyundai Securities was not much different. It recorded a market share of 6.2% in 2012, a decline of 1.8% points from 8.0% in 2009. Brokerage fees earned also declined by 154 billion won (US$138 million, 40.11%) from 383.9 billion won (US$343.9 million) to 229.9 billion won (US$206.2 million). In the same period, Daishin Securities saw a 1.4% point (116 billion won, US$104 million) decline from 6.0% to 4.6%, Mirae Asset saw a 0.9% point (70.7 billion won, US$63 million) decline from 3.4% to 2.5%, Shinhan Investment Corp. from 6.5% to 5.6%, Woori Investment & Securities from 7.5% to 6.7%, and Samsung Securities from 8.1% to 7.7%.

Among the major brokerage houses in Korea, Korea Investment & Securities was the only one that saw a rise in brokerage market share. Its market share increased from 5.8% in 2009 to 6.8% in 2012, an increase of 1.0% points. Brokerage fees earned also increased by 27.1 billion won (US$24.3 million). However, the declines in the market share of the seven other brokerage houses were offset by Kiwoom Securities. Brokerage market share for Kiwoom Securities rose from 10.9% in 1Q 2010 to 15.03% in 1Q 2012, an increase of 4.13% points.

The problem is that while these brokerage houses depend heavily on brokerage fees, there’s little room for improvement. Home trading systems (HTS) and even mobile trading systems (MTS) are widely used, and the competition within the market has continued to drive down brokerage commission rates. In fact, the commission rate fell from 19.5 bp (1 bp = 0.01% points) in fiscal year 2001 to 12.1 bp in 2010, and again to 9.3 bp in 2012.

“Even if the transaction volume increases, the decline in commission rates will offset the volume increases. The structural stagnation will continue,” said Taeho Yoon, a researcher at Hanwha Investment & Securities.