PSE president Ernest Leung said the brokers have expressed concern that the 20-percent rule would deprive them their bread-and-butter, the trading business.
"I think these are legitimate concerns. How do you go about it! It’s a big dilution and there would have to be heavy trade-offs along the way," Leung said.
Under the Securities Regulation Code, voting rights – whether directly or indirectly – are limited to five percent for an individual and 20 percent for an industry or business group. The SEC, however, may provide exemptions from this prohibition – where it finds that such an ownership or control will not negatively impact on the exchange’s ability to effectively operate in the public interest.
But the SEC is standing firm on the implementation of the law, with the corporate regulator prodding the exchange to move forward toward good corporate governance in line with its conversion into a fully demutualized bourse.
"Without such divestment and full compliance with the new corporate governance structure, we shall continue to have an exchange that might not meet the objectives of demutualization as intended by the SEC, "SEC Chairperson Lilia Bautista told Leung in an earlier letter.
Leung said he would ask the SEC to give the PSE more time to work out this provision as they explore and look at other models used in exchanges that have similarly demutualized.
Aside from the 20-percent ownership limit, brokers are also restricted from controlling the 15-man board of directors as provided for under the src. In the present PSE board, brokers comprise not more than 49 percent while the non-brokers make up the majority with eight of the 15-member board. – Conrado Diaz Jr.