Proposed PSE rules pave way for overseas stocks to trade in pesos

Insider Spotlight

• GPDRs would give local investors access to overseas-listed securities through the Philippine Stock Exchange
• The instruments will be peso-denominated, making foreign market exposure available through local trading channels
• Holders will get economic interest in the underlying securities but will not have voting rights

The Philippine Stock Exchange has laid out proposed rules for Global Philippine Depositary Receipts, or GPDRs, a new product that would allow Filipino investors to trade peso-denominated instruments tied to securities listed in overseas exchanges.

Under the draft rules that must be approved by the Securities and Exchange Commission, each GPDR will represent economic interest in an underlying security listed abroad. 

GPDR holders will not possess voting rights in the underlying security, but they may have the option to convert the GPDR into equivalent shares or units of the underlying security, or into cash, depending on the applicable terms.

Why it matters

The product is designed to widen access to global investment opportunities through the local stock market. Instead of directly opening foreign brokerage accounts or transacting in another currency, investors would be able to buy and sell GPDRs on the PSE in pesos.

The PSE said the listing and trading of GPDRs would provide local investors access to opportunities outside the Philippine market and help them build globally diversified portfolios.

Ramon Monzon

The PSE president is pushing for more reforms in tandem with the SEC to deepen the local capital market.

How it works

The rules allow both sponsored and unsponsored GPDRs. Sponsored GPDRs involve a foreign company, called the sponsor, that enters into an agreement with a Philippine-based GPDR issuer to sell receipts representing its overseas-listed securities.

Unsponsored GPDRs, meanwhile, may be issued by a Philippine-based GPDR issuer acting as an intermediary without a formal agreement with the overseas company.

Each GPDR must be backed by an underlying security deposited with a custodian appointed by the GPDR issuer. The underlying securities must be listed, traded, and in good standing on a registered foreign stock exchange that is a member of the World Federation of Exchanges.

Between the lines

The PSE’s framework aims to make foreign exposure more accessible while keeping trading, clearing, settlement, and disclosure within the local market’s regulatory channels.

GPDRs may be listed on the PSE without an initial public offering, although issuers may choose to conduct one. 

The rules require at least 50 holders and a minimum subscription amount of P30 million at listing for an IPO, or three months after listing for a direct listing.

The receipts will be listed on the PSE Main Board and traded generally under the exchange’s equity trading rules. —Daxim L. Lucas | Ed: Corrie S. Narisma