PSE moves closer to merger with PDS

MANILA, Philippines — The Securities and Exchange Commission (SEC) has given the Philippine Stock Exchange Inc. (PSE) the green light to negotiate the acquisition of additional shares in the Philippine Dealing System Holdings Corp. (PDS Group), the operator of the fixed-income exchange.

This decision allows the PSE to revive its dream of integrating the local bourse with the fixed income exchange similar to other countries.

In a meeting on Nov. 21, the SEC en banc allowed the PSE to apply for exemptive relief from the mandatory limit on ownership and voting rights in an exchange by an individual or an industry once negotiations for the buyout of the PDS Group have been favorably concluded.

The SEC has directed the PSE to submit and present a detailed, concrete and time-bound operational plan, which shall be subject to review and approval by the commission.

It has also asked the PSE to submit status reports on the negotiations that the company will pursue in relation to the acquisition of the remaining shares in the PDS Group that it does not yet own.

At present, the PSE owns 20.98 percent of the issued and outstanding capital stock of the PDS Group.

The stock exchange intends to acquire up to 100 percent of the operator of the country’s sole fixed-income exchange.

Under Section 33.2(c) of Republic Act 8799, or The Securities Regulation Code, no person may beneficially own or control, directly or indirectly, more than five percent 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 public interest.

PSE president and CEO Ramon Monzon said that with the latest development, he no longer expects to face the same hurdle the PSE encountered in the past.

The PDS Group includes the Philippine Dealing & Exchange Corp. (PDEx). Incorporated in 2003, PDEx operates the organized 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.

Based on the initial submissions made by PSE, the proposed acquisition will operate in the public interest, as the resulting 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 better risk management systems.