SEC, BSP okay dollar-based trading facility

The capital market’s regulatory agencies have given their go-signal for the launching of a dollar-denominated trading (DDT) facility by the Philippine Stock Exchange (PSE).

PSE chief operating officer Jose Cervantes said their proposal to introduce the DDT has been approved by the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP).

But he said the PSE still has to craft the specific guidelines before it offers the new facility, possibly by the middle of next year.

Under the DDT set-up, the PSE will allot an extended off-floor trading session in the afternoon, after the close of the main morning session, for trades of securities linked to the Philippine market.

These securities will be initially restricted to trades in the New York-listed PLDT and the Canadian insurers Manulife and Sun Life, but may be expanded to additional issues or instruments such as "B" shares of local companies.

Other local stocks listed overseas are Benguet Corp., First Philippine Fund, Philex Gold (Canada) and Ionics EMS (Singapore).

Cervantes said that aside from enhancing the mix of the PSE’s trading portfolio, which at present is limited to local equities and government bonds, the DDT will also expand and connect local players to the overseas markets.

"This shall as well introduce an attractive environment for cross-border investments in the country and hence prepare the Exchange for said infrastructure," the PSE official said. At present, a regional cross-border trading is being pilot tested in Singapore and Australia.

Cervantes added that one of the provisions in the dollar board is that foreign exchange should not be bought from banks but instead sourced from the Foreign Currency Deposit Unit (FCDU) accounts or paid in cash.

"The offering of the facility aims to eliminate exchange rate volatility risks by enabling trades to be strictly denominated in US dollars, from actual trade execution to final settlement," he said.

It added that by providing an additional market to its potential participants, depending on the performance or the success of the facility, the DDT is also expected to help shore up the local bourse’s anemic volume and steady downturn.