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PSE weighs options after SEC setback

Posted on March 31, 2016

THE PHILIPPINE Stock Exchange (PSE) is evaluating all options after the Securities and Exchange Commission (SEC) thumbed down its proposed takeover of the country’s fixed-income trading platform, the chief of the equities bourse said yesterday, while expressing his dismay on the manner by which the regulator explained how it came up with the resolution.

File photo shows the trading floor at the Philippine Stock Exchange in Makati City. BW
PSE President and Chief Executive Officer Hans B. Sicat told reporters the stock market is not rushing its next step, which could involve asking the SEC to reconsider its ruling and maintaining the current dual structure of the capital market. “What we’ll do is at this stage, we are evaluating what options we have. There is no immediate rush. We will evaluate not just with the PSE stakeholders, but clearly we have to close the loop with the PDS shareholders because it also affects them whatever we do,” Mr. Sicat said.

In an executive meeting last Monday, the SEC denied the request of the PSE to acquire more than 20% of PDS Holdings, Inc., the holding company that owns the country’s sole fixed-income trading platform Philippine Dealing and Exchange Corp. (PDEx).

Mr. Sicat emphasized that exchanges must be a full service operator, stressing that the proposed merger was important to rationalize its cost structure -- the same reason cited by other global bourses which have taken the path of consolidation.

“While the SEC may have a conclusion that capital market integration is not necessary or not the model, the industry will like to disagree. We see the global trend,” Mr. Sicat said, as he questioned the “very strange” process on how the regulator dealt with a “very important topic.”

“It appears they have a new modus operandi wherein they mention everything to the press and gave us the official answer by fax three hours later... I just feel that as a major issuer and partner in capital market development, that’s not the correct process,” he said.

“On a personal note, I think it is a bit surprising, with the Powerpoint [presentation] or press release, that they’ve started to add some adjectives or name-calling about the PSE,” Mr. Sicat said.

He was referring to strongly worded materials used by the SEC to explain its decision to the media in a briefing last Tuesday. “I think that’s a bit surprising in the sense, while they are entitled to their conclusions, it’s also quite obvious to us, at least, in the way they spun it to the media, they intentionally either glossed over some of the facts or decided not to tell you a lot of the issues.”

The characterization that the PSE “doesn’t know anything” about the fixed-income exchange was “unfair,” Mr. Sicat said, recalling that the equities bourse expressed its intention to the SEC through its submissions and presentation to keep PDS’ “highly capable” management.

At the outset, Mr. Sicat said, the stock market operator communicated to the regulator that it will reduce depository fees by 10% with a two-year timeframe to bring it down further to 25%, contrary to the claims of the commission, citing its filings, that the consolidation will result only in a 0.001% decline.

The PSE stressed it has addressed technical glitches and pointed out that it initially evaluated a share-swap deal resulting in a merger of equals, but that structure didn’t push through because of disagreements on valuation among the shareholders.

“I think the adjectives used to describe the PSE for being incompetent [and] not understanding what the themes are are distortions of the truth and does not serve the public or the media in trying to understand the issues at hand,” Mr. Sicat said. -- Krista Angela M. Montealegre