Manila Bulletin

PSE cracks down on inactive brokers

- By JAMES A. LOYOLA

The Philippine Stock Exchange (PSE) is planning to prod its inactive trading participan­ts to resume operations or lose their privilege to trade at the local equities bourse.

“We've written to all these inactive brokers, 52 of the 184, telling them that we are giving them three months from June 30… to signify their intention if they are still interested to operate as a broker,” said PSE President Ramon S. Monzon in an interview.

Monzon added that, “if they are not interested to operate as a broker under the PSE rules, then we can declassify them as a trading participan­t because they have no more plans to operate and if they are no longer considered a broker then their trading privilege automatica­lly becomes vacant and goes back to the PSE.”

Monzon said that inactive brokers will have to signify if they intend to operate again. “If you signify in the three-month period, then we will give you another three months to raise R100millio­n capitaliza­tion which the SEC is now requiring of a new brokers that operate,” he said.

If the broker is able to raise the R100 million, Monzon said “we will give you another six months to prepare for operation: hire the people, get an office, and things like that.”

Monzon noted that “the reason the PSE board did this is they want to encourage these 52 trading right owners to operate so there's more activity in the market. So if they are not going to operate then the trading rights become available to new groups or companies that would like to operate.”

He said the current practice now is that, if a company wants to operate as a broker, it will have to buy a trading right from one of the inactive broker since “the PSE cannot issue a new one precisely because there is 52 already that are not operating.”

As a bonus to the declassifi­cation of inactive brokers, this will reduce the percentage of PSE shares being held by brokers which is currently above the allowable cap of 20 percent.

However, Monzon said that, of the 52 inactive brokers, only 14 still have PSE shares while the others have already divested.

Assuming all these 14 inactive brokers don't signify their intention to operate and are declassifi­ed as brokers, the combined ownership in the PSE of all stock brokers will go down to the 23 to 24 percent level, said Monzon.

The PSE is seeking to comply with the 20 percent ownership cap so regulators will allow it to be exempted from the same rule in the acquisitio­n of PDS Holdings which owns the fixed income bourse.

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