Mixed Reactions Trail SEC’s 0.025% Charge on Fixed Income Transactions

Kayode Tokede
Capital market stakeholders have expressed mixed feelings to the plan by the Securities & Exchange Commission (SEC) to charge 0.025 per cent on fixed income (Bonds) secondary market transactions.

The apex capital market regulating body in a circular noted that the fee on fixed income transactions is expected to be effective from January 1, 2022.

Speaking with THISDAY, doyen of the market, the oldest trading stockbroker present on the trading floor, Mr. Rasheed Yusuf noted that the new fee would hike in the cost of transactions in the fixed income instruments.

In his words: “Both the buyer and seller of fixed income instrument will have to pay the additional cost. Will it make prospective investors mull on the additional cost and conclude that the yield on longer attractive? These are the things we will be looking out for next year.!

“We will need to find out by next year if the additional cost is sufficient to discourage players in the fixed income market or it will bring about a marginal effect. However, it will be a function of volume an investor is buying from the fixed income market. Can you imagine of 0.025 per cent fee on N1billion worth of investors transaction in the fixed income market unlike someone buying N1million in the same market?”

Speaking also, the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Mr Sam Onukwue said: “I do not think it’s out of place for SEC to do so. The Commission has been charging on equities all along. The proposed charges on fixed income securities should not discourage investors from the asset class.

“Investors have their preferences and would always weigh their risk tolerance and other fundamentals in making investment decisions. We have risk takers and risk averters. The former invest more in equity while the latter have strong hold in fixed income securities.”

Also commenting, the President of the Association of Capital Market Academics (AMAN) Prof. Uche Uwaleke noted that charge would empower SEC to carry out effective regulation and enhance the capital market.
According to him: “The charge is on transactions in the secondary segment of the bond market and it is very much in order as it is already in place in the secondary segment of the equities market.

“It will financially empower SEC to carry out effective regulation and development of the Nigerian capital market. Besides, 0.025per cent is not significant to the point of discouraging transactions in the bonds market.”
The Commission had in a circular noted that it will charge 0.025per cent of the total value of all secondary market transactions on Bonds, while the Securities Exchange on which the transaction occurs will charge an amount not exceeding 0.025per cent of the total value of secondary market transactions on Bonds while Bond transactions by dealing members will attract a single regulatory fee of 0.0001per cent of the total value of the secondary market transactions on Bonds, and are exempt from the 0.025per cent fee charge earlier stated.