Commission introduces new levy on transactions on stock markets

Business

By CLARISSA MOI
THE Papua New Guinea Securities Commission has introduced a new levy on all transactions on the country’s stock market, PNG Stock Exchange (PNGX).
PNGX chairman David Lawrence told The National the Securities Commission introduced the new levy on Feb 8 and it went into effect as of March 8, where each buyer and seller was required to pay an additional 0.75 per cent of the transaction value to their stockbroker.
He said the stockbroker was required to pay that money to PNGX each month and PNGX was then required to pay it to the Securities Commission each month.
Lawrence said PNGX was concerned that the levies had the potential to disincentivise activity in the market at a time when they were trying to build it up from an existing low base.
He said there was resistance from buyers and sellers to paying the levies for on-market transactions.
“We have also heard that some buyers and sellers are giving consideration to off-market transfers of listed securities rather than executing orders through the market, as off-market transfers will not be subject to the levies.”
Lawrence said PNGX had advised the Securities Commission to inform the market of what action it proposed to take to recover any unpaid levies from buyers and sellers and to inform the market of its views on off-market transfer practices.
“PNGX is concerned that the imposition of the levy at this time is counterproductive to the development of the capital markets in PNG and not aligned with the Government’s financial sector development strategy (FSDS) to create an environment that is equal in its competitiveness to the ASX,” he said.
He noted that there were concerns about the potential impediments created by the levy that it would:

  • INCREASE trading costs to all investors. This would have an adverse impact on returns to investors, including superannuation investors;
  • GIVE other more established international markets in the region an unintended competitive advantage;
  • DETRACT from the investability of Papua New Guinea;
  • ENCOURAGE PNG incorporated companies to list on established international markets with lower sovereign risk; and/or,
  • ENCOURAGE the proliferation of “off-market” transactions, reducing the disclosure, pricing, transparency, and investor protections inherent in the formal, regulated PNGX market to both the domestic and international detriment of PNG.

Lawrence said the outcomes can reduced liquidity in an already illiquid market; remove incentives to develop the market; and, increase the cost of funding to PNG companies and the Government.