To this end, both stock exchanges have entered into a preliminary agreement last week that will formalize and strengthen the relationship between the two entities, according to an official with knowledge of the development.
Derivatives are financial instruments whose values are derived from underlying assets, commodities or indices. Derivatives are made up of contracts between parties who agree to an exchange of future values if certain conditions are met. Some examples include futures contracts, options, warrants, and credit default swaps.
PSE president and CEO Ramon Monzon and TWSE chairman Sherman Lin signed the memorandum of understanding last Aug. 20, 2024 in Taiwan.
The agreement calls for PSE and TWSE to collaborate on product development and market promotion and share best practices in areas such as regulations; environmental, social and governance practices; and market trends.
As a result of the tie-up, both bourses will form a working group to carry out the objectives in the stated areas of cooperation.
The deal is part of Monzon’s initiative to launch derivatives on PSE by early 2026 if regulatory hurdles — primarily the issue of how to fairly tax derivatives — are satisfactorily addressed.
Regulatory hurdles
At the same time, the bourse leadership is trying to convince the Securities and Exchange Commission to adopt existing regulatory frameworks for derivatives from other jurisdictions and adjusting them for the local environment rather than drafting new rules from the ground up.
The PSE leadership is hoping that this expedited route would help regulators avoid a repeat of the lengthy approval process for short selling rules which took four years to be cleared, and only after President Marcos pushed for the innovation at the recommendation of Investment and Economic Affairs Sec. Frederick Go.
Depository rights in ASEAN bourses
Meanwhile, the PSE under Monzon is also planning to launch Global Depository Rights early 2025.
This will allow certain companies in ASEAN exchanges to trade depository rights on the PSE and will likewise allow shares certain PSE-listed companies to be traded reciprocally in these ASEAN bourses.
Senior Reporter
