The new system is seen to help reduce the settlement period from the current three days after trade standard. The acquisition of the system has already been approved by the PSE board.
A team from the PSE visited Bangalore and Mumbay in India for its final due diligence on the vendor systems and facilities last July 21. The PSE said the purchase might be carried out this month and expects the system to be operational by yearend.
Acording to the PSE, the proposed system will be cheaper to maintain and will thus help make the settlement and clearing process self-financing, if not profitable.
The new system will integrate the functions of both the central depository as well as the central clearing and settlement systems currently being managed by the Philippine Central Depository Inc. and the Securities Clearing Corp. of the Philippines (SCCP), respectively.
The PSE said this is the best time to install a new system since the bourse will be well-prepared to take advantage of opportunities when the market picks up.
Since the breakeven for the system would be around P250 million in daily trades, the current market activity can well support it and enhance the bottomline of the exchange instantly, the PSE said.
The PSE noted that one of the most vital sources of fees for other exchanges within the region is from settlement and clearing. The Australian, Singapore and Hongkong exchanges earn more than double their fees in settlement, clearing and custodial services than in listing.
At present, all transactions being paid by brokers for their settlement and clearing are paid as PCD fees, while the SCCP fee is equivalent to only 10 percent of the PCD fee.
The SCCP checks whether stocks are delivered to their respective investors as cash is paid, or what is known as a major part of the settlement of stock transactions.
The PSE earlier asked the Securities and Exchange Commission to allow it to increase its ownership interest in SCCP or to merge SCCP with the exchange’s operations.
The PSE board had planned to raise its stake in SCCP by way of a share-swap deal with other SCCP shareholders, namely Rizal Commercial Banking Corp., Citibank N.A., and Equitable PCI-Bank. Under the proposed deal, the PSE will trade a portion of its shares in the PCD with the shares of the three banks in SCCP. The three banks have a combined 49 percent stake in SCCP.
Once the share-swap deal is effected, the SCCP will be wholly owned by the PSE and the PSE’s share in PCD will be reduced from 31 percent to about 20 percent.
The PSE currently has a 31 percent interest in PCD, while the BAP and the three banks have a combined stake of 69 percent.