THE Securities and Exchange Commission (SEC) said it is giving the Philippine Stock Exchange (PSE), the operator of the country’s lone equities-trading market, until November 15 next year to reduce the ownership of stockbrokers in the bourse to 20 percent as a prerequisite to the planned merger with the fixed-income exchange.
“We are finally making some headway in reducing the brokers’ ownership in the PSE to within the 20-percent cap for any industry group,” SEC Commissioner Ephyro Luis Amatong said.
Amatong said the PSE has a plan on how it can comply with the ownership cap. PSE officials are optimistic it is workable, but added it is still too early to disclose details on how the PSE plans to do this.
He said the SEC is giving the PSE “one year from last November 15” to accomplish this. The PSE is asking the SEC to exempt it from the ownership cap to enable it to push through with its planned merger with the Philippine Dealing System Holdings Corp. (PDS), the owner of the fixed-income trading.
Under the plan, the PSE will acquire 100 percent of the outstanding shares of PDS from current shareholders, but this will violate the 20-percent ownership limit for an industry group under the Securities Regulation Code.
Amatong said the SEC is willing to grant the PSE’s request for exemption to this rule if it complies with various requirements, including its own ownership cap on stockbrokers.
In March the SEC thumbed down the PSE’s application for exemption to the ownership cap for the merger with PDS for failing to show it is ready for such an integration.
“The PSE, through its submission, failed to show its acquisition of PDS will produce any benefit to the investing public, issuing companies or capital market development, in general,” SEC Chairman Teresita Herbosa said. “PSE’s proposal failed to provide clear and time-bound commitments to demonstrate the consolidation will translate to meaningful benefits for various stakeholders.”
Citing the planned vertical integration of the depository, Amatong said the PSE has failed to demonstrate this would translate to meaningful benefits for the investing public, as well. “PSE has only provided a marginal and tokenistic commitment to reduce depository fees by 0.001 percent.”
“The larger fear here is the PSE does not appear to fully appreciate the central importance of the fixed-income market in financial intermediation and does not have a concrete plan on how to develop and manage such a market going forward.”