(Bloomberg) -- China’s financial regulator has proposed cutting the commission rate for public investment funds, the latest measure to spur trading and bolster the market as the world’s second-biggest economy faces a raft of headwinds.
The China Securities Regulatory Commission is seeking public input on the proposal to “reasonably” reduce transaction fees, and plans to strengthen supervision over the distribution of commissions on fund trading, according to a statement late Friday.
The CSRC said commission fees for passive equity funds shouldn’t exceed the average rate for stock trading calculated by the Securities Association of China. Public funds that fail to meet the requirement should lower the rate within three months, it said.
Read more: China Brokerages Rise as Regulator Proposes Wider Capital Use
The regulator also asked fund managers not to use commissions to pay for research from brokerage firms, a common practice in developed markets known as soft dollars. Fund managers shouldn’t pay for consultancy, research, and financial terminals to brokers via commissions, according to the statement.
Funds were also asked to lower the concentration of transaction fees paid to a single brokerage. Large public funds shouldn’t allocate more than 15% of the funds’ annual fees to one firm, while the proposed cap for smaller funds is set at 30%.
--With assistance from Foster Wong and Felix Tam.
(Updates with more details on soft commissions throughout)
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