PSE allowed to take over PDS

MANILA, Philippines — The Securities and Exchange Commission (SEC) has approved the application of The Philippine Stock Exchange Inc. (PSE) for exemptive relief, enabling it to acquire additional shares in the Philippine Dealing System Holdings Corp. (PDS Group).

The PSE is looking to acquire 100 percent of the PDS Group as part of its goal to integrate the two exchanges.

In its initial submissions to the SEC, the PSE said the resulting integration of the country’s equity and fixed-income exchanges would allow for the delivery of more efficient and more types of products, services and better risk management systems for financial services.

The SEC has directed the PSE to submit and present a detailed, concrete and time-bound operational plan, which shall be subject to a separate review and approval by the Commission to ensure that the proposed integration of PSE and the PDS Group will lead to greater access to both fixed-income and equity products for retail investors, reduced cost of trading securities, and similar efficiencies and benefits for issuers and other market participants.

In a meeting on Dec. 19, the SEC en banc allowed the PSE to exceed the mandatory limit of 20 percent on ownership and voting rights in an exchange by an individual or an industry.

The SEC is granting it leeway to own up to 100 percent of the PDS Group, which includes the Philippine Dealing & Exchange Corp. (PDEx) which, in turn, operates the organized secondary market for the trading of fixed-income securities issued by corporations, as well as the government.

Following the SEC approval, it likewise directed the PSE to submit the status of its negotiation on its acquisition of additional PDS shares every two months, including share offer price, among others.

The PSE must also submit its operational and developmental plans and timeline in relation to the fixed income market.

At present, the PSE owns 20.98 percent of the issued and outstanding capital stock of the PDS Group and plans to increase this to 100 percent.

According to the Securities Regulation Code (SRC), no person may beneficially own or control, directly or indirectly, more than five percent of the voting rights of the exchange and no industry or business group may beneficially own or control, directly or indirectly, more than 20 percent of the voting rights of the exchange.

The SEC, however, may adopt rules, regulations or issue an order, upon application, exempting an applicant from the ownership limit if such ownership or control will not negatively impact on the exchange’s ability to effectively operate in the public interest.