RP’s first fixed income exchange opens today

The Philippine Dealing and Exchange Corp. (PDex) launches today the country’s first-ever fixed income exchange (FIE).

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

Industry sources, however, said there were apprehensions about the PDEx’s plan to impose a P500,000 license fee on banks and other financial institutions for a specific type of transaction under the second phase of FIE’s trading.

The first phase of trading is basically inter-bank involving transactions between Bank of the Philippine Islands (BPI) and Equitable PCIBank.

The second phase will include corporates and other firms wanting to course their trading transaction through the FIE.

Industry players said the license fee must be different from the subscription fee paid by member-bank of the Bankers Association of the Philippines (BAP) which has to pay ComputerShare, the service provider and equity investor of the exchange.

"While the market is awaiting the first FIE transaction, some of us are already thinking about the second stage and its cost. Already, we are thinking about how to recoup our expenses," some bank treasury officials said.

There is apprehension that the widening of intermediation cost would result in new expenses which will be incurred while trading at the PDEx.

"In order to recoup our operational costs, spreads in the secondary market may have to be adjusted upward," another treasury official said.

However, Philippine Dealing System and Holding Corp. (PDS Group) president and chief executive officer Vicente B. Castillo clarified that there would be more savings trading with PDEx versus the present set-up. The PDS Group is the holding company of the PDEx.

Castillo admitted that the $1,000 fee is for the rental of the system, which is basically to provide a multi-product capability.

"It (system) can do fixed income transactions, and it will ultimately do foreign exchange (forex)," he said.

Castillo added that advancing to forex trading would rationalize the PDEx providers, and the savings will come when it rationalizes the providers.