BROKERS, TURN OFF YOUR LIGHTS! 80% of brokers are in trouble

Adina Ardeleanu

Stock market trading has slowed down significantly, as the financial crisis worsened, and turnover fell dramatically as prices tumbled, which has caused broker fee earnings to drop abruptly, which even has some of them question their own survival.

Lately we are seeing a wave of closures of broker\"s branches and layoffs, together with various cost cutting measures.

At one brokerage house in Bucharest, the flashy banner on its face wall, which was lit during the good times, is now turned off to save some power, and cut expenses. Another brokerage firm which used to occupy two floors of a villa in the center of Bucharest, has decided to rent the ground floor. Anything just to get through the crisis.

The average fee for trading stocks is around 1%, with the average monthly expenses of a brokerage house reaching 100000 lei (one billion old lei), several sources on the market have confirmed.

Only one fifth of the current brokers still cover their current operating expenses. The numbers may not, however be entirely accurate, as \"Broker\" Cluj, the only brokerage firm listed on the Stock Exchange is the only brokerage company required to publish financial reports.

With the engines running on empty and drawing on the reserves created during the previous years, even brokers that can\"t break even for now are hoping to avoid bankruptcy.

Some brokers say that we may see six or seven bankruptcies in the coming period, provided the turmoil doesn\"t last much longer. Even though they are secretive in talking about their business, some brokerage firms see the number of intermediaries cut by as much as half before the recovery begins.

Brokerage firm Global Valori Mobiliare has already had its license revoked at its own request, with the company to either change its scope of activity or to close shop.

The National Securities Exchange Commission (CNVM) also revoked the license of Orizont Vest Oradea, and also requested the liquidation of the company, following serious infringements of stock market regulations.

No farther than last Thursday, the securities market watchdog has banned brokerage firm Ventrust Investments Târgu Mureş from trading on its own behalf on the stock market, as the company\"s equity dropped below 730000 Euros, as required by its operating license.

At a glance, it seems that a lot of brokers were not taken out of the game by the financial crisis itself. That\"s an arguable point. Perhaps these irregularities would not have happened had the market context been more favorable.