The Philippine Mercantile Exchange Inc. (Philmerc) is urging the Securities and Exchange Commission (SEC) to approve its application for a license to operate a futures exchange.
Philmerc president Rodolfo Cruz said his company is reactivating the application which it filed with the SEC last October. Cruz said the SEC has not informed Philmerc of the status of their application.
In a bid to speed up the approval of its license, Philmerc said earlier it is considering a strategic alliance with the Chicago Board of Trade (CBOT).
"With CBOT as a strategic partner, we can be confident that there will be no fiasco of any kind whatsoever," Cruz said.
But the SEC is still wary of reopening the futures exchange market after the failure of the Manila International Futures Exchange (MIFE) which operated in the late 1980s. As a result of speculation and manipulation of prices of commodities traded in the futures market, many investors, even the small ones, got badly burned when the exchange collapsed a few years later.
The SEC expressed reservations about the plan. The SEC said there were three major concerns. The first is that a market for futures instruments may not yet exist in the country. The SEC also wanted Philmerc to come up with safety nets to ensure that a failure similar to that of MIFE will not be repeated.
Moreover, the brokers and exchanges department (BED) of the SEC wanted more time to study the intricacies of a futures exchange market, saying it is not prepared at this stage to exercise its regulatory function over the proposed futures exchange.
Cruz said Philmerc was submitted to the SEC endorsement letters from the Bangko Sentral ng Pilipinas and the Bankers of Association of the Philippines. "We believe they are the most qualified in assuring the Commission that a market for futures instruments exist," said Cruz.
Cruz also criticized the unpreparedness of the brokers and exchanges department.
"We must express surprise that the Commission has publicly solicited formal proposals despite the unreadiness of the brokers and exchanges department. Such proposals on which proponents spent time and money should not have been solicited if the regulatory department is not ready. A similar admission of inadequacy in the private sector would have swiftly resulted in dismissal of the person responsible for such lapse in management," Cruz added.
Cruz said the lack of preparedness could be overcome in the six months that Philmerc expects the futures exchange to be operational.