The Securities and Exchange Commission (SEC) is looking to break expensive stocks into smaller, more affordable pieces through tokenization to lower the entry barrier for ordinary Filipinos to invest in the stock market.

SEC Chairman and CEO Francis Lim told reporters on Monday that the regulator is exploring whether shares can be tokenized as it looks for new ways to widen participation in the local capital market.

“I even have this idea, why don’t we tokenize our shares of stocks? That’s an innovation. Tokenization,” Lim said.

Under the concept, high-priced shares could effectively be divided into bite-sized investments, allowing investors with smaller amounts of capital to gain exposure to stocks that may otherwise be too expensive for them.

Lim, however, stressed that tokenized stocks are still an idea that must first be tested, with the regulator examining the data and rules needed before deciding whether they can be introduced to the market.

“It may or may not happen. But we have to test. We will look at the data, look at the appropriate regulation. In fact, it’s a complete set of due diligence,” Lim said.

The SEC could use its regulatory sandbox to test innovations under a controlled environment before determining whether they are fit for wider use.

But admission into the sandbox would neither guarantee SEC approval nor shield companies from liability for breaches of existing securities rules.

SEC Commissioner Rogelio V. Quevedo said the sandbox is intended to give regulators room to evaluate new products without weakening investor safeguards.

“Being in the sandbox does not cure the penalties that will be imposed on a company that has committed violations against the Securities Regulation Code (SRC). Being in the sandbox is not an excuse or is not simply a highway to being approved already by the SEC. It is there so that the SEC can properly evaluate,” Quevedo said.

The regulator also intends to keep tight controls around testing to prevent experimental financial products from being used to take advantage of investors.

“I can also say that, to conduct testing, I cannot agree that we will open the system because abuses might be committed while it is being tested. So, we will make sure that we will not open a system which can be used to abuse the public,” Quevedo said.

If eventually cleared by regulators, tokenization could give the Philippine stock market another way to draw smaller investors by reducing the amount of money needed to gain exposure to individual companies, while putting new technology under existing investor-protection safeguards.