PSE pushes ETF overhaul to revive listings and deepen market

Insider Spotlight

• PSE plans to ease listing requirements for exchange-traded funds, including actively managed ETFs
• Capitalization requirements for ETF issuers may be cut significantly to attract more asset managers
• The Exchange is also developing a Negotiated Trade Reporting Facility and expanding securities lending reforms
  
  
  

The Philippine Stock Exchange (PSE) is preparing another round of regulatory reforms aimed at broadening investment products and improving market liquidity, following the publication of recommended revisions to its market making rules earlier this month.

In a statement, the bourse said it will soon release proposed amendments to its Exchange Traded Fund (ETF) rules, opening the door for a wider range of issuers and products to enter the local market. The planned changes are designed to revive activity in the country’s ETF segment and encourage greater participation from asset managers.

Why it matters

Under the proposed framework, collective investment schemes, including umbrella funds and unit investment trust funds (UITFs), may list multiple sub-funds under a single ETF issuer. 

The revisions would allow the listing of different types of securities, such as fund units, alongside shares of an ETF company. Actively managed ETFs would likewise become eligible for listing.

The proposed rules would lower capitalization requirements for issuers from P250 million to P50 million. Investment companies with at least a five-year track record may qualify for further reduction to as low as P1 million.

In addition, ETF issuers would only need one authorized participant to facilitate the creation and redemption of ETF shares or units, while market makers would no longer be required to serve as authorized participants.

Ramon Monzon

The PSE chief is banking on a slew of reforms to revitalize the local stock market.

The big picture

The amendments provide clearer guidelines for ETFs whose underlying indices track foreign exchange-listed securities. According to the Exchange, these changes are intended to make the local ETF framework more flexible and globally competitive.

“We are working on reviving our ETF market, and we hope these rule changes will provide the impetus for asset managers to structure and list ETFs,” PSE president and CEO Ramon Monzon said.

Beyond ETFs, PSE is developing rules for a Negotiated Trade Reporting Facility, a mechanism that would allow brokers to execute trades in a manner similar to negotiated trading facilities in other exchanges. The initiative is expected to support liquidity and improve the flow of funds in the market. Both the ETF and trading facility proposals will be released for public consultation.

Meanwhile, PSE and Philippine Depository and Trust Corp. are working with stakeholders to amend securities borrowing and lending rules to enable directed pooled lending through PDTC’s facility. 

The revised framework is expected to make participation easier for foreign institutions while helping expand the domestic lending pool through greater involvement from pension funds, index funds, and insurance companies.  —Daxim L. Lucas| Ed: Corrie S. Narisma