SEC okays PSE amendments to dollar board trading rules

The Securities and Exchange Commission (SEC) has approved the Philippine Stock Exchange’s proposed amendments to the dollar denominated trading (DDT) facility rules in line with efforts to make the dollar board more profitable and attractive to investors.

Among the changes include the fixing of the board lot at 100 shares for each DDT transaction regardless of the prevailing price and the price fluctuation at $0.01 or one cent regardless of the prevailing price.

The SEC said it already raised its concern over the use of the existing peso board’s price fluctuation table as the basis for trade orders in the DDT facility even before the DDT rules were approved by the commission.

This as the SEC’s Markets Regulation Department (MRD) anticipated it would be difficult to find a perfect fit between the price of Philippine Long Distance Telephone Co. in peso and the price of PLDT in dollar.

The MRD noted that a one-fluctuation move of PLDT share amounting to P0.25 in the DDT means that its price goes up in peso term by P14. When compared to a P5 change for every one-fluctuation move in the peso board, this reflects a P9 difference.

"While this condition could have offered arbitrage opportunity to investors to automatically correct the difference in prices in the peso board and in the DDT due to the imbalance in the fluctuation levels, such arbitrage opportunity would hardly come," the MRD said.

The MRD said the wide gap between the peso fluctuation and the corresponding dollar fluctuation could have been one of the reasons for the unattractiveness of the DDT facility.

There was only one transaction at the DDT since its launch last July 16. The transaction involved 300 shares of PLDT done at $10.25 per share.

Also approved was a proposal to charge a settlement bank fee amounting to $5.50 on a per buy/sell invoice.

The MRD posed no objection to this proposal since it anticipates that it will be the institutional investors with high value transactions who will prefer to trade in the DDT.

The MRD, however, noted that while the proposal may favor an investor who trades with higher transaction value, it may be a disincentive for customer trading lower value transaction since this customer has to pay the higher fee of $5.50 even though his order is highly unlikely to get matched with more than one sell order.

The changes were drafted by the PSE to boost trading activity in the DDT.

The PSE earlier considered scrapping its DDT facility amid lukewarm response from investors.

Investors have stayed away from the DDT due to problems in settlement procedures and pricing transactions because of unstable foreign exchange rates. The DDT follows the fluctuations of peso stocks but is denominated in dollars.