Philippine Stock Exchange vows to ensure integrity of stock market

MANILA, Philippines - Amid the phenomenal rise in the share prices of listed companies particularly Manila Electric Co. (Meralco), the Philippine Stock Exchange (PSE) has assured the public that it has not wavered in its commitment to safeguard investors’ interest against trading irregularities.

In a statement, PSE president Francis Lim said the exchange continues to monitor the stock market as part of its job to prevent stock monopoly, insider trading and other abnormal transactions.

“We would like to assure the public that the PSE is unwavering in its role of keeping a close watch over the market. If there is any market irregularity, the PSE has made sure that it is way ahead in safeguarding investors. We will take the appropriate actions when necessary,” Lim said.

Lim issued this statement in the wake of reports likening the meteoric rise of Meralco share prices to the 1999 BW Resources Corp. price-fixing scandal which caused the near collapse of the stock market.

BW’s owner Dante Tan, along with seven other individuals were accused of manipulating the stocks of BW, which saw its share price zoom to a record high of P107 per share from P2.04 in January 1999.

Meralco has experienced a major run-up in its share prices the past weeks on speculations of a continuing fight for control of the power utility giant between its major shareholders. Meralco stocks rose to a record high of P302.50 but is now down to P229 each share.

Lim explained that PSE implements a trading band that limits upward and downward price movements of stocks in a day to 50 percent and 40 percent, respectively. A price freeze is implemented when the trading band is breached.

Aside from this, the exchange also calls the attention of the listed firm to provide information relating to the unusual price movement of its stock. If the listed firm does not respond to the inquiry within the day, a trading halt is imposed the following trading day. The trading halt will remain until a reply from the listed firm is received.

Lim said that while the PSE allows market forces determine share prices, all stocks listed on and traded at the Exchange are subject to close monitoring under the bourse’s Advanced Warning and Control System (AWACS).

The state-of-the-art AWACS is part of the PSE’s key reform initiatives to restore investor confidence and curb stock market abuses.

Lim said the AWACS has market replay functions which allows PSE investigators to revisit any day’s trading activity and price movements. It also detects a number of stock market infractions, including wash sales or the illegal sale of securities bought and sold by the same individual in order to create the illusion of volume for those particular securities.

“We are taking our role as a watchdog very seriously and we continue to monitor any movements in the market to ensure that all players conduct their activities in a fair environment. We are working with the Securities and Exchange Commission to ensure that we leave no stones unturned when it comes to policing the stock market,” Lim said.