SEC gives PSE more time to address merger concerns

MANILA, Philippines - The Securities and Exchange Commission (SEC), the corporate regulator, has given the Philippine Stock Exchange (PSE) more time to address the SEC’s concerns regarding the planned merger of the PSE and the Philippine Dealing Exchange Corp. (PDex).

The PSE operates the local bourse while the Philippine Dealing System operates the PDex, the country’s fixed-income platform, and the two exchanges are moving to consolidate to offer additional value to issuers, investors, and other market participants at various levels.

But the merger needs the approval of the SEC through the grant of an exemptive relief to the PSE to own more than 20 percent of an exchange.

Under the Securities Regulation Code, no single industry or business group should own more than 20 percent of an exchange. Thus, PSE is asking for an exemptive relief from the SEC regarding the rule.

However, the SEC wants some thorny issues clarified first before it decides on the matter.

Originally, the SEC gave the PSE until Dec. 4 to clarify some of the issues, including the actual implementation plan for the merger and whether this would result in higher costs for investors. The PSE, however, asked for more time, which the SEC granted.

“The SEC granted PSE’s request for an additional period of 45 days or until Jan. 26, 2016 to submit comprehensive and complete response to fully address the concerns raised earlier by the SEC,” said SEC spokesperson and OIC of the Commission Secretary Arman Pan.

He said the SEC is being very cautious in dealing with the PSE’s plan to acquire the PDS Group considering the size of movements in capital is more significant in the fixed income market,” he said.

In 2014, PDex turnover reached P4.4 trillion, more than double the amount traded in the stock market of only P2.1 trillion.                

The PSE had hoped to get SEC approval as early as November because it had signed share purchase agreements with PDS shareholders and was supposed to finalise the deals on Nov. 27.

To date, the PSE has signed SPAs with four shareholders of PDS, 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.