ADB to help RP set up futures, bond exchanges

The Asian Development Bank has agreed to provide technical assistance to the Securities and Exchange Commission, the Bangko Sentral ng Pilipinas and other government agencies in the drafting of rules governing the trading of commodity futures, fixed-income instruments, and innovative securities.

ADB consultant Chie Kashibawara said the multilateral agency will help SEC and BSP come up with the operating manuals for the futures and bond exchanges.

The commodity futures exchange has remained closed since 1999 following the closure of the Manila International Futures Exchange due to widespread anomalies.

The fixed-income exchange, on the other hand, is expected to be operational by June or July this year. The rules have yet to be finalized by the Bankers Association of the Philippines.

It is designed to provide a platform for the secondary trading of fixed-income securities such as government securities, commercial papers and asset-backed securities issued by companies. The fixed-income exchange will be the country’s first official electronic market for public and private debt instruments.

Apart from this, the ADB has approved the purchase of a state-of-the art surveillance system for the SEC pursuant to the technical assistance component of a $150-million grant for strengthening regulation and market governance.

The system, dubbed advanced warning and control system, is being installed in coordination with the Philippine Stock Exchange and the Philippine Central Depository Inc. It is expected to enhance the corporate watchdog agency’s monitoring and surveillance capability.

The software is designed to easily detect fraud, manipulation, and abusive practices associated to trades occurring in the financial markets.

The system is necessary for the SEC to effectively perform its oversight functions on the PSE as a self-regulatory organization exercising its duties and obligations of maintaining an orderly and fair market.

AWACS will enable the SEC to have quick access to historical information and reports, and will warn for unusual market activities.

It will scrutinize orders the time they are placed until they are cancelled or traded. It enables storage of information in the folders for cases worthy of further investigation.

The license grants the SEC the right to use for a period of 24 months the software and the servers that will be connected to two client-terminals, which will be located at the corporate regulator’s Market Regulation Department and the Compliance and Enforcement Department, respectively.