The Philippine Stock Exchange Inc. (PSE) said the guidelines on short selling transactions took effect immediately after regulators gave the go signal on critical components of securities borrowing and lending.
Short selling can only function if an SBL program is in place, the PSE said.
The PSE announced SEC approval of offshore collateral for SBL in May while the Bureau of Internal Revenue accepted the filing and registration of the global master securities lending agreement in September.
“We are grateful to the SEC and BIR for their approval on important regulatory aspects of SBL and short selling. This development brings us a step closer to the full adoption and implementation of these much-awaited programs,” PSE president and CEO Ramon S. Monzon said.
The PSE also updated the eligible securities in the guidelines to include members of the PSE MidCap and PSE Dividend Yield indices.
Initially, only securities comprising the PSE index and exchange traded funds were considered eligible securities for short selling.
The PSE will make a separate announcement on the official launch date of the short selling program, it said.
The SEC earlier said it is banking on the potential of short selling to boost trading activity in the country’s equities market.
“We are pushing to align the short selling environment with the major Asian markets, which has the potential to promote liquidity, stabilize the market, protect investors and further unlock the value of shares of Philippine corporations,” SEC chairman Emilio B. Aquino said.
The SEC has paved the way for short selling by issuing the relevant rules as early as 2018 when it approved PSE guidelines on short selling transactions.
It has since worked with the PSE and market participants in ensuring they are ready for implementation.
Recently, the SEC looked at the adoption or non-adoption of practices in other markets to advance short selling in the Philippines.
Short selling is allowed in Singapore, Hong Kong, Malaysia, Thailand and Indonesia. The SEC is also considering requiring regular reports on all short selling and securities borrowing and lending activities and their compliance with current rules and policies to better guide the agency moving forward.
“We will balance our role as regulator and market innovator, imposing the necessary restrictions and safeguards while ensuring that they will not stifle investors and trading participants from fully taking advantage of this trading strategy,” Aquino said.
