The Securities and Exchange Commission has approved the application of the Philippine Stock Exchange Inc. for exemptive relief in its bid to acquire additional Philippine Dealing System Holdings Corp. shares.
Meeting en banc, the SEC permitted the PSE to exceed the mandatory 20 percent ownership and voting rights cap by an individual or industry, giving it leeway to own up to 100 percent of the PDS group, the operator of the country’s bond exchange platform.
The SEC also approved the transfer of the shares of stock of an exchange controller, to allow the PSE to acquire PDS shares currently held by other PDS shareholders.
The SEC directed the PSE to submit every two months the negotiation status of its acquisition of additional PDS shares, including, among others, the share offer price. The PSE must also submit its operational and developmental plans and timeline in relation to the fixed income market.
In addition, the PSE were to submit every three months updates on the timeline of concrete plans and commitments such as the reduction in fees, valuation, enhancements of systems, and the launch of new products following the acquisition.
The PSE owns 20.98 percent of the issued and outstanding capital stock of the PDS. The stock exchange plans to acquire up to 100 percent of the operator of the country’s sole fixed-income exchange and eventually merge the equities and the fixed-income exchanges.
The Securities Regulation Code mandates 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 20 percent of the voting rights of the exchange.
The SEC, however, may adopt rules, regulations or issue an order, upon application, exempting an applicant from the ownership limit if such ownership or control will not negatively impact on the exchange’s ability to effectively operate in the interest of the public.
The PDS Group includes the Philippine Dealing and Exchange Corp. (PDEX) which operates the secondary market for the trading of fixed-income securities issued by corporations, as well as the government. PDEX also calculates the Philippine Dealing System treasury reference rates, which form the basis for valuing and marking-to-market interest rate-sensitive instruments.
In its initial submissions, the PSE committed to ensuring that the acquisition operate in the public interest as the integration of the country’s equity and fixed-income exchanges would allow for the delivery of more efficient and more types of products, services and result in better risk management of financial services.
The SEC directed PSE to submit a detailed, concrete and time-bound operational plan ensuring the proposed PSE and PDS Group integration will lead to greater access to both fixed-income and equity products for retail investors, reduce the cost of trading securities, and similar efficiencies and benefits for issuers and other market participants.
