PDEx launching first-of-its-kind derivative product

MANILA, Philippines — The Philippine Dealing and Exchange Corp. (PDEx) is set to introduce a first-of-its-kind derivative product in the local market next week.

PDEx president and CEO Antonino Nakpil said the exchange would be launching the bond forward contracts on Monday after recently securing regulatory approval.

“We’re excited about that because that’s a first purely Philippine peso-denominated interest rate hedge,” he said.

Nakpil said the product would be available initially to the banks and then later on to clients who may find it useful.

“It’s a derivative. It’s a new thing. It will be settled in a way that’s unique. We’re not creating a futures contract like it’s the traditional sense. But it’s a forward expression of what has been established as a method of hedging in the futures markets,” he said.

Nakpil is hopeful that the new product, being a first and uniquely Filipino, will work.

“We think it will work. It’s not a futures contract, so there’s no leverage. We’ll allow only the dealers and qualified investors – basically, professionals only,” Nakpil said.

“This is not meant for retail investors. So there’s no sense of equality for all because some contracts are not meant for retail investors, especially if there’s leverage involved. Once you involve leverage like the futures contracts, it becomes complicated,” he said.

PDEx was incorporated in 2003 to provide trading infrastructure for the fixed-income market.

It operates the organized secondary market for the trading of fixed-income securities, which includes both government and corporate securities.

For this year, PDEx is looking at a P600-billion target for corporate bond issuances, a new record-high if achieved.

The highest capital raised through corporate bond issuances was recorded in 2022 amounting to P508.66 billion.

Last year, PDEx was looking at P400 billion for corporate bond issuances, but fell short of the target after it finished the year with P360 billion.