SGX to help PSE develop derivative products

THE Philippine Stock Exchange, Inc. (PSE) is teaming up with the Singapore Exchange Ltd. (SGX) to develop listed derivative products that could make the local market more accessible to international investors.

In a joint statement issued over the weekend, the PSE and SGX said they are looking to develop new Philippine equity index derivatives that will be listed on the local bourse.

“We are laying the groundwork for development of derivative products to enable PSE to offer a more diverse product line to investors and help us catch up with peer exchanges. Our partnership with SGX will allow us to learn from their experience in operating a derivatives market,” PSE President and Chief Executive Officer Ramon S. Monzon said in a statement.

A derivative is an investment product whose price tracks the value of underlying assets such as stocks, bonds, commodities, currencies, and market indices.

Back in 2013, the two exchanges also partnered for the listing of the SGX-PSE MSCI Philippine Index Futures in the neighboring market. SGX is the largest exchange in Southeast Asia, which also has India, China, and Japan stock market futures.

In this type of derivative product, an investor agrees to purchase an index at a specific time in the future, protecting the seller from fluctuations in the market. The investor then makes a profit if the price turns out higher, and vice versa.

“We are pleased to broaden our cooperation with PSE to advance the Philippine derivatives market,” SGX Chief Executive Officer Loh Boon Chye said in a statement.

“As domestic and international markets are complementary, this enhances our role in increasing access into ASEAN and emerging Asia, as well as providing tools for clients to manage risk and allocate capital.”

The PSE said it will also work with the Securities and Exchange Commission (SEC) and other stakeholders for the development of rules and regulations to list and trade derivative products.

It also noted the vast opportunity to invest in the ASEAN region, which if taken as a single country would generate a gross domestic product of more than $2 trillion. This makes the ASEAN among the 10 largest economies globally.

Local regulators have been working on enhancing investment opportunities within the region.

Earlier this year, the SEC released proposed guidelines to implement the ASEAN Capital Markets Forum pass, which looks to allow the free movement of investment advisers in the ASEAN region. The draft circular states that the Philippines, Malaysia, Singapore, and Thailand will facilitate crossborder movement of investment advisers, without additional licensing requirements. —