Analysts say the PSE’s proposal to negotiate trade fills a gap in market structure
The Philippine Stock Exchange’s (PSE) negotiable trading platform will address a long-standing gap in the local market by allowing certain pre-arranged legal transactions that cannot be carried out under existing trading rules, according to analysts.
“PSE’s proposal to introduce a negotiated exchange is a constructive and timely market structure reform that addresses the long-term gap in the Philippine equity market,” Toby Allan C. Arce, head of trading at Globalinks Securities and Stocks, Inc., said in a Viber statement on Thursday.
In a consultation paper released on July 1, the PSE proposed a negotiated trading platform as a new trading platform for pre-arranged transactions that falls outside the current block sales and reverse transaction rules.
Under the current framework, regular block sales require a minimum amount of P20 million and must be done within 5% above or below the reference price (the previous closing price or the last adjusted closing price following the company’s actions), while special block sales require a minimum amount of P50 million.
Works subject to those limits may be performed as separate works, as long as the agreed price falls under the best bid and offer (BBO).
According to the exchange, there is currently no way to make a pre-arranged trade that does not satisfy any requirement.
“One of the limitations of the current framework is that certain formal transactions organized cannot be carried out effectively if they fail to meet the minimum size of the block sale or fall outside the best bid and contribution required to make a normal transaction,” said Mr Arce.
The proposed facility will have no minimum price or volume requirement and will allow negotiated trades to be executed within a 15-minute window after the Run/Trading-End session, subject to a price within 5% above or below the full-day weighted average volume (VWAP) and one company’s trading requirement.
Mr. Arce said those safeguards would provide greater flexibility without jeopardizing market integrity.
“A negotiated exchange facility closes this gap by allowing these transactions to take place within clearly defined price limits and exchange infrastructure rather than forcing participants to reschedule transactions or delay execution.”
“These safeguards strike a balance between providing artificial flexibility and maintaining confidence in the integrity of the market price,” he added.
President of BDO Securities Corp. John Tristan D. Reyes also accepted the proposal.
“To me, this is a welcome proposal. It allows more flexibility and transparency for investors who want to make negotiated transactions in the stock market.”
The discussion is accepting comments from trade partners and other stakeholders until July 7. – Alexandria Grace C. Magno
