MANILA, Philippines - The Philippine Stock Exchange (PSE) is boosting its array of services and investment options starting in the second half in line with the goal of making the local bourse a world-class stock market.
Cooperation deals with different entities and the acquisition of a majority stake in Philippine Dealing Systems Holdings Corp. (PDS) will improve the operational efficiency and profitability of the stock market operator, its top official said last week.
In a briefing, PSE president and CEO Hans B. Sicat said the local bourse will sign a deal in the coming weeks to secure the Bankers Association of the Philippines’ (BAP) 28.9 percent stake in PDS Group, the operator of the country’s fixed income securities trading platform.
“We look at this as part of our three-year strategic plan,” Sicat said.
Last year, the PSE launched a three-year plan that outlines strategies to make the local bourse a world-class stock market. The growth program involves the launch of more products and services and the full implementation of several laws that stimulate investments.
“When you take a look at all other exchanges, whether its a fixed-income activity or depository, a lot of these activities are truly part and parcel of a vertically-integrated exchange and that’s what we’re trying to do,” Sicat said.
Sicat said the PSE targets to achieve a combined equities and fixed income securities trading platform by the end of the year.
The PDS Group generates around 80 percent of its income from the depository activity, which will not be only a revenue enhancer but also allow the PSE to “pursue a number of products we’re talking about and that includes this cross collateralization activity,” Sicat said.
Last week, the PSE’s board of directors authorized the acquisition of BAP’s shares in PDS Group, which was valued at P2.25 billion. Other key shareholders of PDS Group are the PSE (20.98 percent) and Singapore Exchange (20 percent).
The consolidation of the Philippines’ stock and bond markets, which is supported by the Bangko Sentral ng Pilipinas and the Department of Finance, is seen to enhance liquidity in the financial market.
To date, total amount of tradable corporate debt instruments in fixed income trading platform Philippine Dealing & Exchange Corp. is at P423.76 billion issued by 26 companies, with 74 securities being traded.
Other projects in the pipeline of the PSE are the stock borrowing and the improvement of data services.
“We now have the rules from the Insurance Commission that will allow insurance companies to lend in this manner,” Sicat said.
“Hopefully, before the end of the year as these products become available, various participants in the market will figure out how they can hedge, optimize portfolio and the like so everyone get practice,” he added.
Insurance firms could lend a portion of their portfolio to improve market liquidity and become the building blocks for derivatives and futures.
The value of stock borrowing transactions reached just a little over P1 billion in 2012, accounting for a tiny portion of the P1.77-trillion value turnover that year.
Late this year, PSE will take advantage of its recent deal with Deutsche Börse Market Data + Services on the exploration of a market data cooperation.
“We’ll be able to utilize Deutsche Börse’s global reach to sell internationally more of market data products we can come up with,” Sicat said. Both exchanges plan to collaborate on licensing current market data offerings, increasing distribution channels for real-time data, and designing new products.
In July, PSE signed an agreement for NASDAQ OMX to deliver the industry-leading trading technology X-stream Trading to the local bourse operator, replacing the current electronic trading system next year in line with plans to increase its trading capabilities and offerings.
First half net income of PSE substantially improved due to the capital raising activities of local companies.
Net income after tax surged 34 percent to P570.26 million in the first semester from P425.54 million, driven by operating revenues that climbed 27.61 percent to P909.49 million from P712.68 million.