Fixed income exchange sets launch for March 28

The country’s first fixed income exchange (FIE) will finally be launched on March 28, elevating the fledgling domestic capital market at par with international financial standards.

The FIE will likewise make the shift to the mark-to-market method of pricing securities, whether corporate or government-issued.

Likewise, it will reduce the risks of sourcing funds from international markets by introducing more sources of domestic capital.

The FIE is an electronic and transparent trading system for sovereign government securities (GS) and other debt instruments such as commercial papers.

Philippine Dealing System and Holding Corp. (PDS Group) president and chief executive officer Vicente B. Castillo said the price of government and corporate securities will then be at real-time basis with an operating FIE.

Banks, insurance companies, mutual funds and other financial institutions can trace or price their various products real time for their current value.

Castillo said that the trading platform will follow initially the bucket pricing system "but will move to yield-to-maturity (YTM) convention with the switching-off of illiquid GS, either through a buy-back or exchange program by the Bureau of Treasury (BTr)."

The Philippine Dealing and Exchange Corp. (PDEx), a member of the PDS Group, will launch the FIE.

PDEx executives said that the country must be able to compete with other money centers in the region to attract back Philippine investors seeking capital in offshore markets.

"We must develop resources to assist local credit-worthy corporations to access their investments so as to provide them domestic capital and avoid the pain of a credit crunch initiated by the loss of capital due to major adjustment in foreign exchange, a continuing risk inherent in going abroad for funding our growth as evidence by the 1997 financial crisis," they said.

The FIE is a necessary infrastructure designed to tidy up investment handling and protection. This process, alternatively, means a stronger capital market, fortified by the trust and confidence of the investors.

The Bangko Sentral ng Pilipinas (BSP) had been urging the private sector to establish a FIE as a necessary partner in the thrust of the regulators to institute reforms in the banking/financial system.

Other key sectors supporting the formation of the FIE are the Bankers Association of the Philippines (BAP), the Philippine Stock Exchange (PSE), the Chamber of Thrift Banks (CTB), the Rural Bankers Association of the Philippines (RBAP), the Financial Executives of the Philippines (Finex), the Investment Houses Association of the Philippines (IHAP), the Development Bank of the Philippines (DBP), the Social Security System (SSS), the Philippine American Life and General Insurance Co. (Philamlife), Computershare, and Tata Consultancy of India.