Fixed-income exchange raises capital stock to P500-M

The Securities and Exchange Commission (SEC) has approved the plan of Philippine Dealing System Holdings Corp. (PDSHC) to raise its capitalization from P20 million to P500 million.

PDSHC is the parent company of the Philippine Dealing & Exchange Inc. (PDEI), the corporate vehicle for the planned fixed-income exchange.

Of the new capitalization, P120 million has been subscribed and P81.65 million paid up.

The fixed-income exchange is designed to provide a platform for the secondary trading of fixed-income securities such as government securities, commercial papers and asset-backed securities issued by companies. It will be the country’s first official electronic market for public and private debt instruments.

Based on documents filed with the SEC, PDEI will ensure an efficient, stable and secure market for the trading and settlement of securities by providing facilities that promote price discovery, transparency and efficient clearing and settlement systems that comply with best international practice standards.

PDEI will work in close cooperation with the SEC, Bangko Sentral ng Pilipinas, other relevant government agencies and financial institutions to develop and improve the ability of the Philippine market participants to compete with global players.

The fixed-income exchange will open more avenues for the private and public sector issuers to tap low-cost capital for the investing public to earn stable returns from fixed-income instruments. It is expected to be fully operational by the second or third quarter of this year.

The creation of a fixed income exchange is aimed at making more efficient the existing loose structure of bond trading and other forms of indebtedness in the secondary market. It is also expected to benefit the government as it would narrow the spread of bonds.

At present, bond prices are quoted based on indicative prices instead of actual transacted prices – a situation which the electronic exchange hopes to correct.

The exchange may also serve as an avenue for insurance firms to get a matching issue or instrument based on their longer-dated requirement.

The United States Agency for International Development (USAID) has agreed to provide technical assistance to the project.

The USAID had been instrumental in the creation of the Philippine Central Depository, which revolutioned securities transactions with the introduction of scriptless trading.

The SEC has thrown its full support for the establishment of a fixed-income exchange as it believes such move will stimulate the growth of Philippine financial markets.