THE Philippine Stock Exchange, Inc. (PSE) is confident it will finally be able to bring down broker ownership in the bourse to less than 20% after the conduct of its stock rights offering (SRO) in March.
In a statement issued over the weekend, the PSE said it has signed an underwriting agreement with BDO Capital and Investment Corp. and First Metro Investment Corp. for the issuance.
With the two firms underwriting the SRO, the PSE said this guarantees that the shares will be fully subscribed and result in diluting broker ownership below 20%.
Under the SRO, PSE shares will be sold at P252 apiece to existing shareholders as of March 1 — excluding trading participants — from March 12 to 16.
“The firm commitment of our underwriters to our SRO effectively reduces the ownership of brokers in the Exchange to below 20%. Compliance with the Securities Regulation Code (SRC) on the 20% maximum broker ownership in the Exchange has finally been achieved,” PSE President and CEO Ramon S. Monzon was quoted as saying in a statement.
Item C of Section 33.2 of the SRC states that “no person may beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange and no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange.”
Complying with this rule has prompted the PSE to conduct the SRO, alongside revoking the trading participant status of inactive brokers.
“It took time as part of the process involved the revocation of the trading participant status of inactive brokers and this required a period of six months to afford said inactive brokers with due process. But we were committed and focused all throughout the process and we are happy to see its completion and conclusion,” Mr. Monzon said.
In August 2017, the PSE said there were 52 inactive trading participants in the bourse, 14 of which held shares. If declassified, the PSE said broker ownership will then be brought down to around 23-24%, from the previous level of 27.9%.
Ensuring compliance with the single-industry cap is also necessary in obtaining the Securities and Exchange Commission’s approval for the PSE’s proposed acquisition of the Philippine Dealing System Holdings Corp. (PDSHC).
“We are introducing monitoring and trading mechanisms, including the necessary system automation to ensure that broker ownership limits in the Exchange will no longer be breached moving forward,” Mr. Monzon said.
To finalize the deal, the PSE has filed a petition with the SEC for exemptive relief, allowing the former to own more than 20% of the fixed-income exchange.