SEC defers action on PSE, PDex merger

MANILA, Philippines - The planned merger of the stock market and the fixed-income exchange remains hanging after the Securities and Exchange Commission (SEC) deferred action on the matter.

SEC insiders said the corporate regulator still wants to thresh out thorny issues that could arise as a result of the merger.

“No decision was issued on Friday,” the source said.

Instead, the SEC gave the PSE 15 more days to clarify issues. It has likewise committed to issue a decision on whether or not to approve the merger within 60 days upon receipt of the PSE’s clarificatory letter.

The PSE operates the local bourse while the Philippine Dealing System operates the Philippine Dealing Exchange Corp., the country’s fixed-income platform.

The two exchanges are moving to consolidate to offer additional value to issuers, investors, and other market participants at various levels.

The PSE has signed share purchase agreements (SPAs) with PDS shareholders and was supposed to finalize the deals last Friday (Nov. 27).

In an interview before the Nov. 27 deadline, PSE chairman Jose Pardo said the PSE would have to see whether it could extend the deadline for finalizing the special purchase agreements.

One contentious issue the SEC wants to clarify is how the merger would actually be implemented.

“How will tradability happen across the different (fixed income and equities) platforms? How will settlement happen?” the source said.

Another issue the SEC wants clarified is the fee.  “The SEC wants to make sure that the fees stay low,” the source said.

The same source said when these issues are ironed out, the SEC could grant the PSE exemptive relief from a requirement that prevents an industry or business group from owning more than 20 percent of an exchange.

To date, the PSE has signed SPAs with four shareholders of PDS, namely the Bankers Association of the Philippines, the Finex Research and Development Foundation, Inc., Whistler Technology Services Inc., and Insular Investment Corp.

These four shareholders have a total combined ownership in PDS of 40.06 percent while the PSE’s stake is at 20.98 percent.

Other PDSHC shareholders that have expressed intention to sell their shares to the PSE include the Singapore Stock Exchange, the Philippine America Life and General Insurance Co., the Social Security System, the Investment House Association of the Philippines, Golden Astra, Tata Consultancy Serves Asia and Computershare Technology Services.

PSE president Hans Sicat said the merger would deepen the Philippine capital market and bring this at par with the global markets.

“We have had numerous discussions with the Department of Finance, the Bangko Sentral ng Pilipinas, and the SEC on this matter. We look to them to support this process of consolidating the equities and fixed income exchanges which will further align the Philippine capital markets with the global markets,” he said.