PSE updating rules on market-making

MANILA, Philippines — The Philippine Stock Exchange Inc. (PSE) has released its proposed amendments to the market-making rules, aligning them with global industry standards to boost stock market liquidity.

The PSE describes market-making as the continuous provision of liquidity by a market-maker through the simultaneous posting of two-way quotes, executed in compliance with the exchange’s rules and applicable regulatory requirements.

The PSE has crafted a general framework applicable to all market-making operations.

“Having a main framework will make it easier and more efficient for us to craft product-specific market-making rules when needed,” PSE president and CEO Ramon Monzon said.

The existing market-making rules of the PSE apply to Exchange Traded Funds.

The amendments now include a market-making framework for Global Philippine Depository Receipts and may later be expanded to cover individual stocks and other exchange-traded products.

“A market-maker has an important role in ensuring continuous liquidity in the stock market. We updated the rules based on global industry standards,” Monzon said.

A market-maker is defined by the PSE as a registered broker-dealer that assumes the obligation to provide two-way quotes to ensure liquidity and maintain a fair and orderly trading market for exchange-traded products eligible for market making.

The proposed rules include accreditation for market-makers, which require them to be registered broker-dealers with the Securities and Exchange Commission (SEC) and trading participants of the PSE.

The trading participant should have an unimpaired paid-up capital of at least P100 million and have been continuously operating for the three years immediately preceding the filing of the application.

If the trading participant is unable to meet this requirement, it should have at least two key personnel with at least five years’ experience in securities trading at a WFE-member stock exchange in the local market.

The rules also include the obligations of a market-maker, such as maximum bid-ask spreads, minimum quote sizes and required presence times during trading sessions.

The amended rules likewise introduce new incentives for compliant market makers that were previously unavailable.

The incentives are subject to commercial agreements and may take the form of clearing fee concessions, price quoting services and connectivity support, among others.

Stakeholders are given until June 23 to submit their comments on the proposed amendments.

The comments will be considered in the final version of the rule amendments that will be submitted to the SEC for approval.