With the completion of the semi-annual reports for public mutual funds in 2024, the commission income from securities firms' fund distribution for the first half of the year has been revealed. This data marks the final figures before the reform of mutual fund commissions, which has garnered significant market attention.

According to Wind data, in the first half of 2024, the commission income from securities firms' fund distribution was 6.774 billion yuan, a decline of 29.98% compared to the same period last year's 9.674 billion yuan. Among them, 27 securities firms had a commission income exceeding 100 million yuan, and 9 firms surpassed 200 million yuan, a decrease of 9 firms compared to the same period last year. Among the top 30 securities firms by commission income, only Minsheng Securities and Guolian Securities saw growth against the trend, while the other 28 firms all experienced a year-on-year decline.

Leading securities firms still hold a larger market share, but there has been a significant change in their rankings. In the first half of this year, the top five securities firms by commission income were CITIC Securities, GF Securities, CITIC Construction Investment Securities, Changjiang Securities, and Guotai Junan Securities. Compared to the same period last year, apart from CITIC Securities and Changjiang Securities maintaining their positions, GF Securities overtook CITIC Construction Investment to rank second, Guotai Junan surpassed China Merchants Securities to take the fifth place, and China Merchants Securities dropped from the previous fifth to the seventh.

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Some securities industry insiders have analyzed that, on one hand, the overall sharp decline of about 30% in securities firms' commission income indicates an intensifying Matthew effect competition within the industry, making research business increasingly difficult for small and medium-sized securities firms. On the other hand, despite the overall downward trend, there has been a significant change in the ranking of securities firms' commission income, with the industry's watershed becoming increasingly clear, and the initial signs of the new order after the new regulations are beginning to emerge.

The ranking of securities firms' commission income has undergone a major change. Over the past three years, the scale of the fund distribution market has shrunk year by year, with a 15.19% decline in 2022 compared to 2021, and a further 10.93% decline in 2023 compared to 2022. In the first half of 2024, it continued to decline by 29.98% year-on-year.

In terms of commission scale, Wind data shows that 27 securities firms had a commission income exceeding 100 million yuan, totaling 5.419 billion yuan, accounting for 80% of the overall 6.774 billion yuan in commission income. Among them, 9 securities firms had a commission income exceeding 200 million yuan, a decrease of 9 firms compared to the same period last year. Among these 9 firms, CITIC Securities, GF Securities, CITIC Construction Investment, and Changjiang Securities had commission incomes exceeding 300 million yuan, at 501 million yuan, 387 million yuan, 350 million yuan, and 330 million yuan, respectively.

Additionally, 5 securities firms had a commission income exceeding 200 million yuan, namely Guotai Junan, Huatai Securities, China Merchants Securities, Haitong Securities, and Minsheng Securities, with commissions of 201 million yuan, 206 million yuan, 238 million yuan, 274 million yuan, and 278 million yuan, respectively.

The aforementioned 9 securities firms, along with Industrial Securities, are the top 10 securities firms by commission income in the first half of this year. Accordingly, these 10 firms also have a higher share of commission seats, with CITIC Securities leading with a 7.4% market share, and GF Securities and CITIC Construction Investment having a market share exceeding 5%.Compared to the same period last year, the rankings of these 10 securities firms have undergone significant changes this year. Except for CITIC Securities and Changjiang Securities, which remained in the first and fourth positions respectively, the rankings of the other eight securities firms have all changed.

Among them, Orient Securities has dropped out of the top 10, falling from the seventh place in the first half of last year to the eleventh place in the first half of this year; Minsheng Securities, on the other hand, is a new entrant to the top 10 in the first half of this year, advancing from the nineteenth place last year by 10 positions, reaching the ninth place in the industry ranking.

Additionally, GF Securities has surpassed CITIC Construction Investment Securities to take the second place; Guotai Junan has moved up by one position to the fifth place; Huatai Securities has advanced by three positions to the sixth place; Haitong Securities has moved up by two positions to the eighth place. Meanwhile, the rankings of China Merchants Securities and Industrial Securities have both declined by two positions, placing them at the seventh and tenth places, respectively.

Looking at the year-on-year increase or decrease in the commission income from securities allocation among the top 30 securities firms, only Minsheng Securities and Guolian Securities have seen year-on-year growth, with increases of 4.26% and 31.72%, respectively.

Minsheng Securities stated in its bond mid-term report that despite the year-on-year decline in the transaction volume of public mutual funds in the first half of the year, the transaction volume of its research institute's public mutual funds has continued to rise year-on-year, maintaining rapid development. This is mainly due to the continuous improvement of the company's research system, product system, and sales service system. Currently, the scale of its research institute has exceeded 200 people.

The other 28 securities firms have all seen a year-on-year decline, with the top five securities firms, including CITIC Securities, CITIC Construction Investment, Changjiang Securities, and Guotai Junan, experiencing a decline of over 20% year-on-year. The larger declines were seen in CICC, Zhongtai Securities, Everbright Securities, and Orient Securities, with declines of over 40% year-on-year; Tianfeng Securities, China Merchants Securities, Shenwan Hongyuan, Industrial Securities, Cinda Securities, State Development Securities, and Haitong Securities all experienced declines of over 30% year-on-year.

( Data source: Wind )

Overall, some Chinese and foreign securities firms have seen even larger year-on-year declines in commissions, such as East Asia Qianhai Securities with a year-on-year decline of 100%, Century Securities and Minmetals Securities with declines of over 80%, Shengang Securities, Bank of China International, Chengtong Securities, and Hualong Securities with declines of over 70%, and Xiangcai Securities, Guoyuan Securities, Wanhe Securities, and Dongxing Securities with declines of over 60%.

Of course, there are also some Chinese and foreign securities firms that have seen an increase in commissions year-on-year. For example, Guorong Securities, Daxin Securities, and Liansuo Securities have seen increases of over 100% year-on-year, China Post Securities and Zhongtian Securities have seen increases of around 80%, and HSBC Qianhai, Yuanta Securities, and Goldman Sachs (China) Securities have seen increases of over 50%.

How to respond?In the industry perspective, the decline in brokerage commission income is related to the reduction in trading commission rates for public mutual funds.

In April of this year, the China Securities Regulatory Commission (CSRC) issued the "Regulations on the Management of Securities Trading Costs of Publicly Offered Securities Investment Funds" (hereinafter referred to as the "Regulations"), which officially came into effect from July 1, 2024. The Regulations clearly state that the commission rate for fund stock trading will be reduced, and the upper limit of the securities trading commission distribution ratio for fund managers will be lowered.

According to a research report by Huatai Securities, by the end of June, several fund companies had re-signed trading seat lease agreements with brokerages. The newly signed commission rate for most passive index-type products was 0.02%, while actively managed types were mostly 0.05%. The industry's commission cap and distribution mechanism have been reshaped.

"After the commission reform is implemented, the overall scale of brokerage's allocated commission will contract, but the new regulations have made differentiated provisions for securities settlement funds, allowing them to be exempt from the 15% distribution ratio limit, and it is also clarified that existing products cannot evade the relevant regulations through 'transfer of securities settlement'. Therefore, newly issued securities settlement funds have become the key focus for both brokerages and fund companies," Huatai Securities stated.

In the view of the aforementioned brokerage professionals, under the new commission regulations, the decoupling of fund sales and public mutual fund trading commissions will overturn the fund sales for trading commission model. Research institutions need to focus more on research itself, weaken the sales and service attributes, and solid research capabilities have become the key to the industry's long-term high-quality development. The implementation of the new regulations will also guide the industry to return to its roots and focus on research. It is not hard to imagine that in the future, commission distribution will continue to tilt towards brokerages with excellent research strength, stable operations, and good risk control and compliance.

Under the new regulations, brokerages are also taking relevant measures to respond.

CITIC Securities mentioned at the semi-annual performance briefing in 2024 that the introduction of the new regulations on public fund fee reduction may have a certain impact on the company's income in the short term. However, the company is actively responding, has formulated a special work plan, adjusted and adapted to the new rules and requirements, insisted on and encouraged value investment and long-term investment, and expanded the income scale through multiple channels to adapt to the new models and requirements of wealth management development. In the long term, the relevant policies will further promote the better implementation of various wealth management concepts.

Changjiang Securities also stated in its semi-annual report that the "Regulations" officially came into effect on July 1, and it is expected to have a certain impact on the scale and structure of commission income in the short term, but it will promote the research business to return to its essence in the medium and long term.

"In the first half of 2024, against the backdrop of the reduction of commissions and fees for public mutual funds, the 'securities settlement + custody' cooperation model was proposed to promote the coordinated development of public fund sales and custody business," Changjiang Securities stated. In the second half of 2024, with the public fund commission reform and other capital market reform measures, the securities research business is gradually moving from scale expansion to a stage of high-quality development.

GUOHAI Securities also stated in its 2024 semi-annual report that in the second half of 2024, the company's research business will comprehensively upgrade its business system, actively respond to changes in public fund commission rates, and in terms of external revenue creation, it will enhance the depth of coverage of institutional clients on the basis of consolidating and improving the ranking of core clients, and continuously improve the overall commission market share of the research institute; in terms of internal empowerment, it will actively explore the systematic internal empowerment map and continuously improve service efficiency.