PSE short selling rules out by Q1

By Denise A. Valdez, Senior Reporter

THE Philippine Stock Exchange, Inc. (PSE) is targeting to implement short selling and new listing rules by early next year to help drive up activity in the local market.

In a virtual press briefing on Monday, PSE President and Chief Executive Officer (CEO) Ramon S. Monzon said the bourse operator is expecting to receive regulatory approvals within the fourth quarter to allow short selling as early as the first quarter of 2021.

Short selling is the sale of a security not owned by the seller, but will be settled by the delivery of borrowed securities. Investors may generate profits by selling borrowed securities at a time of higher prices, then buying them at a lower price in the future.

Short selling guidelines were greenlit by the PSE in 2018, but were not implemented due to some pending approvals from the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR).

Specifically, the PSE is waiting for the approval of offshore collateral for foreign investors, the accreditation of the Philippine Depository and Trust Corp. as a certified securities lending agent, and the global master securities lending agreement.

“I hope we can get the approvals by the end of the year, so we can launch (short selling) early in the first quarter of next year,” Mr. Monzon said.

He noted launching short selling may attract a lot of foreign investors as it allows them to hedge their investments.

The PSE is also aiming to submit the final draft of the amended listing rules to the SEC within the next two weeks. It expects to secure the regulator’s go signal by the first quarter of 2021.

In September, the PSE introduced proposed amendments to listing rules that would ease the requirements for companies conducting an initial public offering (IPO).

Among the proposals are removal of the P500-million minimum market capitalization requirement to list on the PSE main board, and the positive EBITDA requirement to list on the PSE small, medium and emerging board.

Stakeholders were allowed to comment on the draft rules until Oct. 7. Mr. Monzon said the primary queries were regarding the sponsorship criterion, which seeks to allow investment houses to guide a company in its IPO phase until three years after its listing.

“We should be submitting that (to the SEC) in the next week or two. Then we’ll be following it up with the SEC… (Hopefully) by the first quarter the listing rules can be approved so we can go out on a campaign,” Mr. Monzon said.

Also on Monday, the PSE elected four new members of the board of directors, including two independent directors.

This makes the PSE compliant with SEC Memorandum Circular No. 20 Series of 2020, which requires the board of directors of exchanges to allocate one-third of the seats to independent directors, and have at least four representatives for issuers, investors, and other market participants.

The two new independent directors are Teresita J. Leonardo-de Castro, former chief justice of the Supreme Court, and Consuelo D. Garcia, former country manager at ING Bank.

Also elected as new directors are Ferdinand K. Constantino, chief finance officer and treasurer of San Miguel Corp., who will be a sectoral representative for non-broker director-investors; and Diosdado M. Arroyo, president of Securities Specialists, Inc., who will act as a broker-director.

They will be replacing Emmanuel O. Bautista, Francis Chua, Amor C. Iliscupidez and Alejandro T. Yu.

The rest of the PSE board members were reelected: Jose T. Pardo, Roberto Cecilio O. Lim and Vicente L. Panlilio as independent directors; Anabelle L. Chua, Rolando Jose L. Macasaet and Edgardo G. Lacson as non-broker directors; and Eddie T. Gobing, Eusebio H. Tanco, Wilson L. Sy and Ma. Vivian Yuchengco as broker-directors.

Mr. Monzon was reelected as president and CEO.

“The PSE Board will continue to adopt reforms and promote initiatives that will help make our market more competitive in the region. I am confident that the new members of the board will contribute significantly to the growth and success of the organization,” Mr. Pardo, chairman of the PSE, said in a statement.