PSE proposes additional disclosure requirements

The Philippine Stock Exchange (PSE) has proposed additional disclosure requirements in line with efforts to ensure a level playing field and to more accurately measure the amount of free float of shares being traded on the local bourse.

PSE president and chief executive officer Francis Lim proposed that listed companies should be required to disclose public ownership reports (POR) every quarter.

The proposed amendment, Lim said, has already been submitted to the Securities and Exchange Commission (SEC) for approval.

Lim said the proposal is aimed at further sharpening the PSE’s regular review of the basket of listed companies.

"We need the POR so we can identify more accurately the amount of free float, or shares that are deemed publicly traded," Lim said.

To extract the free float, the companies subtract from their outstanding stock those shares being held by their strategic shareholders.

Listed companies currently submit the POR to the PSE only upon getting requests for the document from the PSE.

The PSE has proposed the new amendment just three months after it adopted the free float method, along with two other criteria, as additional yardsticks in selecting the composition of the PSEi, the renamed index of the PSE.

Under the previous set-up, the PSE used only three criteria in computing the PSE Composite Index – full market capitalization, liquidity, and tradability.

In the PSE’s new formula, a listed company must satisfy five criteria-free float level, free float market capitalization, tradability, liquidity and volume turnover ratio – to qualify for inclusion or retention in the list of PSEi companies.

The free float portion should represent at least 10 percent of the outstanding shares of the listed stock before it qualifies for inclusion in the PSEi. It is used to determine the weights of companies in the PSEi and in the sector indices. Thus, aside from the price factor, an index member company sees its weight in an index increase when its free float shares also increase.

The PSE is confident that investors will benefit from the revised method in determining the PSEi’s composition by encouraging listed companies to widen their investor base.