Why stockbrokers are going out of business

Stockbrokers are going out of business in growing numbers as the brokerage industry faces consolidation amid an increasingly stern regulatory regime. As many as three brokers — formally known as Trading Right Entitlement Certificate (TREC) holders — either requested to surrender or successfully surrendered their trading rights on Tuesday, according to the Pakistan Stock Exchange (PSX). These brokerages are SMB Securities Ltd, SAAO Capital Ltd and RAH Securities Ltd. Speaking to Dawn, Topline Securities CEO Mohammed Sohail said an increasing number of small and medium-sized brokerages are finding it hard to survive the unrelenting downswing in the stock market, which has reduced the trading volumes down to one-third of their “normal” level. The average daily volume traded in the ready market during the first nine months of 2022-23 decreased 30.9 per cent to 221 million shares. “In addition, an ever-rising number of regulatory requirements meant to comply with know-your-customer (KYC) and anti-money laundering regulations have made the business environment too tough to navigate for players with limited resources,” he said. According to data obtained from the Central Depository Company (CDC), the number of brokers at the end of May 2023 was 218. At the beginning of 2022-23, however, the same number stood at 279, according to the annual accounts of the PSX.