Doing so would have enabled the PSE to promptly identify the discrepancy from the trading of billions of illegally created shares, minimizing harm to minority stockholders.
During an interview with InsiderPH, PSE president and CEO Ramon Monzon expressed regret over previous roadblocks that doomed efforts by the Exchange to acquire PDS, which owns the Philippine Depository & Trust Corp. (PDTC) and the bond platform Philippine Dealing & Exchange Corp.
With the takeover of PDS now imminent, Monzon said investors—especially small players—can expect concrete reforms to improve market transparency, safeguard their money, and support new products, including short selling.
Transparency on share ownership
Monzon wants to implement a new system where all investors’ shares are clearly traceable under their names in the central depository, not just those who own real estate investment trusts.
Monzon said this will allow investors to monitor their holdings in real-time, ensuring greater transparency.
“What I want to do is implement the NOCD [name on central depository] for all shares. So, if you’re an investor, you can be sure no one else is using your shares,” he said.
P13-T worth of shares in physical stock certificates
This is related to another issue the PSE is trying to address, which is the relatively large number of shares that cannot be tracked digitally since these are still in the physical certificate form.
“You know, only 32 percent of shares [based on market value] are lodged. All the rest are certificated,” Monzon said.
The PSE’s total market value is about P19.4 trillion, meaning about P13 trillion worth of shares are in physical certificates.
“The SGX [Singapore Stock Exchange] is at 98 or 99 percent while others are at about 86 percent. We need to bring ours up,” he said.
New depository system, lower fees
Monzon stated that a new depository system is crucial for the PSE to achieve the planned improvements.
“What we also have to do is convince all these certificate holders [to get lodged]. So we have to reduce the fees so it’s painless for them vis-a-vis having physical certificates that could get lost, get destroyed,” he added.
Short selling
Together with the Securities and Exchange Commission, led by chair Emilio Aquino, Monzon played a key role in launching the short selling framework in the Philippines in late 2023.
This initiative aims to boost market liquidity, but adoption remains limited due to market conditions and the need for systems fine-tuning.
“One of the complaints from brokers about the securities lending system right now is that they have to log into the PDTC portal to find out which shares are available for borrowing,” he said.
Borrowing for short selling involves temporarily obtaining securities to sell them with the goal of buying them back later at a lower price for a profit.
But this process was too cumbersome with the PDTC being controlled by a separate entity, Monzon explained.
“At that time, I could not compel PDTC to make investments that will benefit PSE, right? But now, we can create an API [application programming interface] so that the brokers on their own system can find out,” he said.
Analyst view
Alfred Benjamin R. Garcia, research head at AP Securities, is optimistic these improvements can help lower barriers that have discouraged participants from offering products such as short selling.
“It makes sense and should help streamline the process. Hopefully it will finally entice more brokers to participate in short selling,” he said.
Boosting volume via depository receipts
Another product the PSE is promoting to boost liquidity is depository receipts, which represent shares of a domestic company traded on a foreign exchange.
“So, these shares need to be housed in a depository or custodian bank. We’re pushing for PDTC to be that vehicle,” Monzon said, noting that initial profitability for these sponsors will be limited until activity picks up.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
