The Capital Market Authority (CMA) explained that determining the maximum amount for commission of purchase and sale of shares of listed companies in the exchange, which was put into effect since 12th of Shawwal 1437H., corresponding to 17th of July 2016, came after studies prepared by CMA on a number of developed capital markets and a number of exchanges in the region. The maximum of commission takes into account the requirements of business development of brokers as well as the development of the capital market services for investors.
Additionally, when examining and making this amendment, CMA took into account the financial return for the operations of deposit, transfer, registration, settlement and clearing of securities traded within the capital market, which will be adopted by CMA upon the Saudi Stock Exchange (Tadawul) as part of the amended financial return.
CMA reaffirms that this step comes within the framework of the ongoing efforts aiming to strengthen its ability to regulate and develop the capital market, and to apply best practices in the global capital markets, in order to reflect a positive impact on various categories of participating parties in the exchange.
According to the new mechanism, which was approved by CMA board, the maximum of the share purchase and sale commission had increased from (0.00120), (i.e.; 0.120%), meaning an equivalent of (12) base points - to be paid by the seller and buyer - being the equivalent of (SR. 12) for every (SR. 10,000) of the transaction value, to (0.00155), (i.e.; 0.155%), meaning an equivalent of (15.5) base points, being the equivalent of (SR. 15) for every (SR. 10,000) of the transaction value.
CMA board resolution also included the cancellation of the minimum limit of commission for any executed order in the exchange being equivalent to or less than (SR. 10,000). CMA indicated that the cancellation of the minimum limit, which was applied in the previous mechanism for commissions, means that the new percentage will apply to every transaction executed within the exchange, regardless of its value. This would ease the amount of commission on transactions valuing less than (SR. 10,000) compared to the previous method, in which the previous mechanism was deducting (SR. 12) from any transaction valuing less than that amount.
From the share purchase and sale commission, the Authorized Persons (brokerage firms) will receive (0.00105), meaning an equivalent of (10.5) base points of the value of the executed transaction. While CMA and Tadawul will obtain (0.0005), meaning an equivalent of (5) base points of the value of the executed transaction.
This commission is the maximum limit, CMA explained. However, the Authorized Persons (brokerage firms) may reduce the commission to clients within the limits of the broker's allocated portion.
CMA confirms that part of the commission of trading shares will be allocated to support a permanent national program that aims to raise awareness and spread the culture of investment. This program is currently being developed, which intends to elevate the financial, saving and investment culture among all categories of traders and stakeholders in the capital market. The program will also encourage civil society organizations to perform their part in caring for the interests of inexperienced investors, as well as to support the establishment and operation of the Capital Market Academic, along with encouraging and motivating the supervisory role of Authorized Persons.
When amending the commission of trading shares of listed companies, CMA also took into account the fact that companies working in securities activity (i.e.; Authorized Persons) should invest in preparing more qualified national human resources and boosting additional investment in infrastructure to cope with the upcoming changes in the capital market, both technically and professionally.
