PSE plans to adjust trading sked

MANILA, Philippines - The Philippine Stock Exchange (PSE) is tweaking the trading schedule in the local bourse, extending the pre-close period.

In a memorandum, the PSE said it is seeking public comments following the board of directors’ approval of a longer pre-close auction period to five minutes from three minutes.

The pre-close period allows trading participants to enter orders, which will be matched using the computed closing price for a security.

The revision will align PSE with practices in the region, with Hochiminh Stock Exchange’s pre-close period at 15 minutes, followed by Indonesia Stock Exchange and Stock Exchange of Thailand (10 minutes), Singapore Exchange (six minutes) and Bursa Malaysia (five minutes).

It will also “allow the trading participants to assess and counter a sharp price move at the close,” PSE said.

“Some trading strategies being used may require more time for the trading participants to react depending on market conditions,” it added.

Trading participants will also benefit from the extra time to execute orders.

“Exchange-Traded Funds (ETFs) and index funds are mostly benchmarked against the close price of underlying stocks. If a basket of underlying  securities is composed of a large  number of stocks, this may require longer time for trading participants to execute orders in order to minimize impact on prices of the securities” PSE said.

In 2010, the operator of the country’s sole stock exchange introduced a three-minute pre-close period, along with the launch of new trading system PSEtrade.

But last year, the PSE extended its trading hours up to 3:30 p.m., resulting in a total of four hours and 30 minutes trading hours, up from the previous two hours and 40 minutes in which trading ends at 12 noon.

With the revision, pre-open will start at 9 a.m., followed by the market opening at 9:30 a.m., market recess at 12:00 noon, resumption of afternoon trading at 1:30 p.m., pre-close period at 3:15 p.m., run-off period at 3:20 p.m., and market closing at 3:30 p.m.

The pre-close period will be composed of the 3:15 p.m. to 3:18 p.m. pre-close auction period when trading participants can enter, modify or cancel orders. It is followed by the pre-close no-cancel period at 3:18 p.m. to 3:20 p.m. wherein brokers are allowed to enter orders but cannot cancel or modify orders.

Meanwhile, PSE said it is waiving the transaction fees for ETF market makers, whose main role is to ensure sufficient liquidity in the market.

“Given that market making is a novel practice in our market, we want to incentivize participants at this point to help encourage more traders to consider being a market maker for ETFs,” said PSE president and CEO Hans B. Sicat.