Market-making reform targets liquidity gap

From AB Capital's The Opening Bell: Three Moves

Event

Philippine Stock Exchange (PSE) proposed amendments to its market-making rules, creating a broader framework beyond ETFs and covering Global Philippine Depository Receipts, with potential expansion to individual stocks. Rules include accreditation standards, quote obligations, bid-ask spread limits, minimum quote sizes, and presence requirements.

View

In our view, this is a positive structural reform for market depth, though impact will depend on actual participation. Market-making can improve liquidity, narrow spreads, and support price discovery, but incentives must be strong enough to offset inventory, capital, and volatility risks.

Catalyst

Key sensitivities include Securities and Exchange Commission (SEC) approval, broker participation, and commercial incentives. Clearing fee concessions, quoting support, and connectivity assistance could improve take-up. If expanded to individual stocks, we think the benefit would be greatest for mid-cap names with thin turnover.

Action

We think this is mildly positive for PSE and the broader equity market. Liquidity reforms may help attract institutional flows over time, but near-term impact is likely gradual. Monitor final rules, eligible products, and whether market-makers commit capital at scale.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.