PSE okays share swap deal with partner banks

The Philippine Stock Exchange (PSE) has approved a share swap arrangement with three of its partner banks in the Securities Clearing Corp. of the Philippines (SCCP) to gain full control of the latter’s operations and result in lower costs and greater efficiency for brokers.

William Ang, chairman of the PSE’s settlements committee, said the Exchange would seek the approval of the three banks –Equitable PCI, RCBC and Citibank – to swap their 49 percent stake in SCCP for the same value of PSE’s shares in the Philippine Central Depository (PCD), the lodging house for stock sale transactions.

The PSE owns majority or 51 percent of SCCP while in PCD, it holds a third or 33 percent. The three banks have a combined 49 percent in SCCP while owning another one-third of PCD. The remaining 33 percent in PCD is held by the Bankers Association of the Philippines (BAP).

"By completely owning SCCP, PSE would also completely own the new computer system that can finally address our daily concerns about costs and efficiency in SCCP," Ang said.

He added that there will be no increase in transaction costs to the brokers as the charges now being paid to PCD will go instead to SCCP, resulting in a ten-fold increase in SCCP revenues and lower break-even operating levels for SCCP, which receives only 10 percent of the brokers' fees paid to PCD.

Earlier, the opposition block in the PSE board contested the plan to acquire a $1-million computer system for its clearing system, noting that the purchase of the new hardware is not practical at this time given the current low trading volume, with no sign of any improvement in the market in the foreseeable future.

"We therefore request that this project be held in abeyance until the performance of our market has reached a substantial volume justifying the acquisition of the said system," the brokers, led by Robert Coyiuto Jr., said.

But PSE president Ernest Leung argued the new system, which would only cost about $800,000, would be more practical to acquire at this time, ironically using the low trading volume also as a prime consideration.

"Our existing system is old, but not obsolete, but still there is a need to upgrade it and the best time to do that is when there is not much activity. It’s like trying to repair a car while its running, you don’t do that," Leung said.

Ang added while the original budget by last year’s board was $1.5 million, he said the purchase at this time would move the bourse forward despite the hard times.