Philippine Stock Exchange: Technology spurs transition into unified bourse

Technology has had a profound and dramatic impact on the Philippine capital market, making possible the establishment of a single unified stock market in 1992 by integrating the now defunct Makati Stock Exchange and Manila Stock Exchange.

The idea to unite the two exchanges and have it managed by a professional group became a compelling vision of the government headed by then President Ramos.

In order to develop a more efficient capital market, members of both exchanges organized themselves into the Philippine Stock Exchange (PSE), and agreed on a functional unification of the two trading floors.

The PSE established its headquarters at the Philippine Stock Exchange Centre in Ortigas,Pasig City and at the PSE Plaza, along Ayala Avenue, in Makati City. With these two sites, the PSE instituted a twin trading floor belonging to a single exchange.

On March 20 1993, the first election of the PSE’s 15-man board was held, 14 of which were member-brokers of the exchange. The last slot was reserved for the bourse president, a non-broker.

Veteran broker Eduardo C. Lim was chosen as the first chairman of the board and Eduardo de los Angeles the first PSE president.

On March 24, 1994, the one price-one market exchange was achieved through the successful computer link-up of the two existing trading floors. From then on, the PSE established its true identity as the sole exchange of the Philippines.

On Nov. 13, 1995, the unified trading system (UTS) was implemented using the single-order-book system on a MakTrade software where all orders are posted and matched in one computer.

The unification of the Makati and Manila Stock Exchanges into the PSE has spawned innovations, such as a fully automated trading system; provision of a central clearing and depository system; and thorough and accurate disclosures of corporate news to ensure an even playing field.

The PSE, one of the oldest stock markets in the Asia-Pacific region, has actively been participating with other exchanges worldwide promoting the standards, policies, and future directions of the global securities industry.

On Oct. 16, 1995, the PSE was accepted as the 37th full-pledged member of the Federation International des Bourses de Valeurs or International Federation of Stock Exchanges (FIBV).

On Dec. 16, 1997, the PSE was granted a temporary self-regulatory organization (SRO) status by the Securities and Exchange Commission (SEC). With an SRO status, the PSE is equipped with its own regulatory framework and ethical standards to supervise its members.

To magnify its pivotal role in propelling the development of the Philippine capital market, the PSE successfully converted into a stock corporation in Aug. 8, 2001 to comply with the Securities Regulation Code (SRC) whose provisions included the mandated demutualization of the local bourse one year after its enactment.

In 2004, the PSE saw its shares listed on the exchange by way of introduction. Listing by way of introduction refers to the listing of shares without undertaking an initial public offering.

From only 129 listed companies in 1986, the PSE now has a total of 239 listed firms as of July 17 this year.

Market capitalization has increased 14-fold from P41.21 billion in 1986 to P5.93 trillion in 2005. During the period under review, value turnover surged from P11.47 billion to P383.52 trillion.

Last year, the PSE main index went up by 15 percent, beating Singapore whose exchange grew by only 13.61 percent, Thailand (6.83 percent) and Malaysia whose share prices fell by 0.84 percent. The PSE posted the second-fastest growth rate among bourses in Asia.

Net foreign transactions also grew 36.42 percent to P23.73 billion in 2005 from P17.39 billion a year earlier, reflecting increased interest of foreign investors in the Philippine equities market.

The exchange now provides a 24/7 online system access to listed companies for the submission and announcement of company disclosures in line with efforts to ensure a level playing field.

After a thorough review and study, the PSE adopted a two-stage framework that entails changes in computing the PSE index to better reflect a more accurate benchmark of stock market performance.

The exchange now uses several criteria — full market capitalization, liquidity, tradability, sector representation and free float to determine inclusion or retention in the PSE composite index.

Other milestones included the appointment of former Supreme Court Justice Jose Vitug as PSE chairman in 2005 , making him the first independent director to hold the position in the 79-year history of the exchange. It also marked only the second time in the history of the exchange that both its president and chairman are non-brokers.

The PSE continues to drum up public awareness about the stock market by mounting an educational campaign for would-be investors. Banking on the growing popularity of outdoor advertising, the exchange forged an agreement with electronic billboard operators for free advertising spots. The agreement became the basis to run a series of 109-second PSE advertisements in selected and strategic locations in Metro Manila.

The exchange also initiated a drive to include the subject of capital market, securities and investments in the business curricular of local colleges and universities, optimistic that the proposal will go a long way in creating a new breed of skilled stock market professionals.