In-Depth Analysis of the Impact of Falling Commission Rates on the Profitability of the Securities Industry

The securities industry has seen a long-term decline in commission rates, with the traditional benchmark commission rate falling from 0.038% (3.8 per ten thousand) in 2021 to below 0.020% (2.0 per ten thousand) in 2025 [1][2]. Specifically:

Time Node	Industry Average Commission Rate	Remarks
2021	0.038% (3.8 per ten thousand)	Historical peak
2024	0.024% (2.4 per ten thousand)	Sustained decline
H1 2025	0.0215% (2.15 per ten thousand)	Accelerated decline
H2 2025	Below 0.020% (2.0 per ten thousand)	Breaks key threshold
Some online brokerages	0.0085% (0.85 per ten thousand)	Low-price market disruption

Data from the Shanghai Securities Industry Association shows that the average commission rate for A-shares in Shanghai fell 8.2% year-on-year in H1 2025 [2]. This downward trend is not only a result of market competition but also influenced by regulatory policies guiding “anti-involution”.

As an important source of research income for securities firms, commission sharing from public funds has continued to decline since 2021:

• 2021
  : Approximately RMB 10 billion (historical peak)
• 2024
  : Approximately RMB 4.4 billion (YoY -35%)
• H1 2025
  : RMB 4.458 billion (YoY -34%) [3]
• 2025 full-year estimate
  : Approximately RMB 3.5 billion (40% of the peak)

The “Administrative Regulations on Securities Trading Fees for Publicly Offered Securities Investment Funds” (the “New Commission Rules”) implemented in July 2024 further capped commission rates, stipulating that the trading commission rate for passive equity fund products shall not exceed 0.0262% (2.62 per ten thousand) [3].

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Data for the first three quarters of 2025 shows that the brokerage business is typically characterized by “volume growth amid price declines” [1][4]:

Indicator	Value	Change Rate
45 listed securities firms’ net brokerage revenue	RMB 113.539 billion	+75%
Commission rate	-	-8.2%
Average daily trading volume	Approximately RMB 1.8 trillion	+125%

: Revenue growth is entirely dependent on expanded trading volumes to offset the pressure from falling commission rates. If average daily trading volume remained at the 2024 level of approximately RMB 800 billion, brokerage business revenue would decline sharply amid an 8.2% drop in commission rates.

The decline in commission rates is not an isolated phenomenon, as underwriting fees for investment banking business have also trended downward [1][4]:

Business Type	2021 Rate	2025 Rate	Decline
IPO underwriting fees	5-7%	2-3%	57-71%
Private placements	1.5%	0.5-1%	33-67%
Convertible bonds	0.8%	0.3%	62.5%

Fee competition for headliner projects is even fiercer; for example, the IPO underwriting fee rate for a semiconductor company on the STAR Market was only 1.8%, hitting a new industry low [1].

Taking the brokerage business as an example, sensitivity calculations are conducted (assuming 250 trading days):

Commission Rate Scenario	Average Daily Trading Volume (RMB 100 million)	Annual Brokerage Revenue (RMB 100 million)
0.035% (3.5 per ten thousand, high commission)	18,000	1,575
0.020% (2.0 per ten thousand, benchmark)	18,000	900
0.010% (1.0 per ten thousand, low commission)	18,000	450
0.005% (0.5 per ten thousand, ultra-low commission)	18,000	225

: A decline from 0.035% to 0.020% leads to an approximately , highlighting the significant impact of falling commission rates on profitability.

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Falling commission rates have forced securities firms to reshape their business structures. Taking CITIC Securities as an example [1][4]:

Business Segment	2019 Proportion	H1 2025 Proportion	Change
Proprietary Trading	28.38%	43.88%	+15.5 pct
Brokerage Business	23.1%	15.8%	-7.3 pct
Investment Banking Business	17.1%	6.22%	-10.88 pct
Asset Management Business	8.5%	6.5%	-2.0 pct

Proprietary trading has become the largest source of income for securities firms, with the industry’s profit model shifting from traditional channel business to capital intermediary business.

In the face of downward commission pressure, securities firms are actively advancing their transformation to wealth management [5][6]:

• Revenue from agency sales of financial products
  : Reached RMB 5.568 billion in H1 2025, up 32.09% year-on-year
• Expansion of investment advisor teams
  : Added over 6,000 people during the year, with the total number exceeding 86,000
• Buy-side investment advisor model
  : Leading institutions such as CICC Wealth have seen their buy-side investment advisor asset holding scale exceed RMB 100 billion
• ETF Ecosystem
  : The total net asset value of ETFs in the entire market grew by over 50%

The core of the wealth management transformation is shifting from “earning trading commissions” to “earning management fees and service fees”, building a comprehensive service ecosystem oriented toward client asset appreciation [5].

2025 has become a pivotal year for M&A and integration among securities firms [1][2]:

M&A Case	Progress	Total Assets After Merger
Guotai Junan + Haitong Securities	Completed, renamed “Guotai Haitong Securities”	RMB 920 billion
CICC + Dongxing Securities + Cinda Securities	Launched in November, plan disclosed in December	RMB 1.0096 trillion

M&A and integration is an important path to cope with falling commission rates and achieve scale effects, but uncertainties during the integration process have also suppressed short-term valuation recovery.

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Thanks to their diversified business layouts and scale effects, leading securities firms have relatively manageable impacts from falling commission rates [4]:

• CITIC Securities
  (600030.SS): Maintains an ROE of 10.18%, with revenue growth mainly driven by proprietary trading (accounting for 44%) and investment income
• Guotai Junan
  (601211.SS): Has an ROE of 9.07% and a net profit margin of 35.6%, with a high degree of business structure diversification
• Haitong Securities has seen short-term performance pressure due to merger integration, but its long-term competitiveness is expected to improve

Small and medium-sized securities firms face more severe challenges [1][3]:

• Brokerage Business
  : Customers are diverted by online brokerages amid commission price wars, with weak customer bases
• Investment Banking Business
  : The CR5 market concentration of equity underwriting reaches 88%, leaving almost no room for small and medium-sized securities firms to participate
• Research Business
  : With the contraction of commission sharing, small and medium-sized research institutes are under pressure to “cut costs and improve efficiency”

The new regulatory classification evaluation rules have further exacerbated the “Matthew Effect”, with high-quality Class A AA-rated institutions receiving policy relaxations, while Class B and lower institutions face business restrictions [1].

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Time Horizon	Impact Characteristics	Core Variables
Short-Term (2025)	Brokerage revenue +75% but entirely dependent on volume growth	Average daily trading volume, market activity
Medium-Term (2026)	Optimized business structure, with proprietary trading acting as a stabilizer	Proprietary investment income, leverage ratio relaxation
Long-Term	Changed valuation logic, shifting from high elasticity to low-valuation stability	Industry structure, maturity of profit model

The current price-to-earnings (P/E) ratio of the SW Securities Industry Index is only 17.66x, with a 10-year historical quantile of just 12.77%, placing it at a historically low valuation level [1]. The shift in regulatory positioning has directly changed the market valuation logic for the securities industry:

• Traditional Logic
  : Rising trading volumes → increased commission income → net profit growth → skyrocketing stock prices (beta value 1.8-2.2)
• New Logic
  : Rising trading volumes → falling commission rates coupled with capital constraints → limited net profit growth (+30-50%) → stable stock prices (beta value reduced to 1.2-1.5)

Based on the analysis of the impact of falling commission rates on profitability, the following investment directions are recommended:

1. Leading M&A and Integration Targets
   : Synergies from merged entities such as Guotai Haitong and CICC Group
2. Pioneers in Wealth Management Transformation
   : Securities firms with in-depth layouts in buy-side investment advisors and the ETF ecosystem
3. Leaders in Capital Intermediary Business
   : Securities firms with first-mover advantages in margin trading, securities lending, and derivatives business
4. Low-Valuation Stable Targets
   : Leading securities firms with historically low price-to-book (P/B) ratios and relatively stable ROE

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The continuous decline in commission rates in the securities industry has had multi-dimensional and in-depth impacts on profitability:

1. Direct Impact
   : Contraction of traditional commission income, sharp decline in public fund commission sharing, and simultaneous drop in investment banking fee rates
2. Structural Transformation
   : Business structure shifts from “commission-driven” to “capital-driven”, with proprietary trading becoming the core engine
3. Industry Structure
   : Intensified concentration, prominent Matthew Effect, and M&A and integration emerging as a trend
4. Valuation Reshaping
   : Shift in regulatory positioning leads to changes in valuation logic, with the industry moving from high elasticity to low-valuation stability

During the commission rate decline cycle, securities firms need to accelerate business structure transformation, strengthen the layout of high-value-added businesses such as wealth management and capital intermediation, and achieve scale effects through M&A and integration. For investors, they should focus on high-quality securities firms with diversified business structures and leading transformation progress, while paying attention to thematic investment opportunities brought by policy changes [1][4][5][6].

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[1] Securities Industry: Underperformed in the 2025 Bull Market, Can It Regain Its Status as the “Bull Market Flagbearer” in 2026?

[2] M&A and Restructuring Surge, Top 10 Events for Securities Firms in 2025

[3] From Local to Global: The “Triple Transformation” of Securities Firm Research in 2025

[4] Securities Industry Navigating Challenges in 2025: From “One-Size-Fits-All” to “Diversified Development”

[5] “Bull Market Flagbearer”: A Year of Surge in M&A and Restructuring for the Securities Industry

[6] Yang Delong: Investment Opportunities in China’s Capital Market Will Increase Significantly in 2026