PSE to soon allow short selling

MANILA, Philippines — The Philippine Stock Exchange Inc. (PSE) will soon allow short selling after it announced yesterday the immediate effectivity of its guidelines for short selling transactions.

Regulators have given the green light on critical components of securities borrowing and lending (SBL) without which short selling cannot function.

The Securities and Exchange Commission earlier approved offshore collateral for SBL in May 2023 while the Bureau of Internal Revenue (BIR) accepted the filing and registration of the Global Master Securities Lending Agreement (GMSLA) in September 2023.

“We are grateful to the SEC and BIR for their approvals on important regulatory aspects of SBL and short selling. This development brings us a step closer to the full adoption and implementation of these much-awaited programs,” PSE president and CEO Ramon Monzon said yesterday.

Short selling is the practice of betting on the decline of a stock’s price in order to make a profit.

Here, an investor sells a security that he does not own, consummated by the delivery of a borrowed security, with a commitment to return the borrowed security or its equivalent on a determined or determinable future date.

The PSE also announced that it updated the eligible securities in its short selling guidelines to include members of the PSE MidCap and PSE Dividend Yield indices.

Initially, only securities comprising the PSE index and exchange traded funds or ETFs were considered eligible securities for short selling.