The Philippine Stock Exchange (PSE) is rolling out a new wave of reforms to boost market liquidity as it pushes to revive the country’s dormant exchange-traded fund (ETF) market and expand securities lending activity.
The exchange said Monday it will soon release proposed amendments to its ETF rules that would broaden the range of products and issuers eligible to list on the local bourse.
Under the proposal, collective investment schemes, including umbrella funds and unit investment trust funds (UITFs), may list multiple sub-funds under a single ETF issuer.
The PSE would also allow the listing of fund units and other securities, not just shares of an ETF company.
The exchange is likewise looking to introduce actively managed ETFs, potentially widening product offerings and encouraging more asset managers to enter the market.
To lower barriers to entry, the PSE plans to cut the minimum capitalization requirement for ETF issuers to P50 million from P250 million. Investment companies with at least five years of operating history may qualify with capital as low as P1 million.
Other proposed changes include allowing ETF issuers to appoint only one Authorized Participant for share or unit creation and redemption, while removing the requirement for market makers to also serve as Authorized Participants. The rules would also clarify requirements for ETFs tracking foreign-listed securities.
“We are working on reviving our ETF market, and we hope these rule changes will provide the impetus for asset managers to structure and list ETFs,” PSE President and CEO Ramon S. Monzon said.
Beyond ETFs, the exchange is developing rules for a Negotiated Trade Reporting Facility, which would allow brokers to execute trades through a mechanism similar to negotiated trading platforms used by other exchanges. The facility is expected to improve liquidity by providing another venue for executing transactions.
Both proposals will be released for public consultation.
Separately, the PSE and the Philippine Depository and Trust Corp. (PDTC) are pushing changes to securities borrowing and lending (SBL) rules to allow directed pooled lending through PDTC’s facility.
The model would permit bilateral lending transactions in which both lender and borrower are identified, a structure expected to make it easier for foreign institutions to participate in the local securities lending market.
The PSE submitted the amended SBL rules to the Securities and Exchange Commission on 16 April.
At the same time, the PSE and PDTC are encouraging pension funds, index funds, and insurance companies to join PDTC’s Lending Agency Service to expand the pool of securities available for lending.
