Initial offering of digital bonds scheduled in February

MANILA, Philippines — The Philippine Dealing System Holdings Corp. (PDS Group) will make its first-ever offering for a digital bond in February as part of a plan to expand the country’s capital market online.

Philippine Dealing Exchange Corp. president and CEO Antonino Nakpil said the agency has crafted a roadmap for the transfer of the debt market to digital platforms.

Nakpil said the use of the distributed ledger technology for registry and depository complements the promotion of the electronic securities issues portal (e-SIP), wherein issuers and selling agents can file the papers online for their initial public offerings of corporate bonds.

Nakpil said the PDS Group has worked with a Singapore-based financial technology firm to create a proof of concept (POC) DLT-backed digital registry and depository infrastructure. It will then test the platform’s functionality and performance in linkage with e-SIP.

After that, Nakpil said the PDS Group would make a live issuance of a digital bond by February. Through the POC, investors can make transactions in the capital market, from bond purchasing to asset servicing and even transfers and settlements.

“The goal of the POC is to deploy a viable DLT-powered digital registry and depository that will be resilient and robust enough to support the full life cycle of a digital bond from issuance, asset servicing, transfers and settlement up to maturity,” Nak­pil said.

“The PDS is aiming to conduct end-to-end test of the digital registry and depository with market participants this month, and is targeting its possible live launch with an issuance of digital bond by late February,” he said.

Finance Secretary Carlos Dominguez, however, expressed concern over the use of the POC, saying it must be secured end to end to make sure that the platform is protected against hackers.

Nakpil, in response, said the PDS Group has assessed the exposure of the system to possible threats that may risk it to online fraud. He said the PDS Group would pursue efforts to strengthen the protection of the platform from hackers and scammers.

The PDS Group is also working on the second phase of the e-SIP for the secondary market. In the second phase, the agency will improve cybersecurity to put in place the protection measures before it launches the portal’s utilities for stakeholders.

The PDS Group is coordinating with the Bankers’ Association of the Philippines and the National Association of Securities Broker Salesman Inc. to expand the reach of e-SIP among clients.

This initiative looks to do away with the process where investors have to keep on submitting the same forms several times when buying corporate bonds from different brokers.