Philippines SEC approves guidelines on lending and short selling
07 January 2020 Phillippines
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The Philippines Securities and Exchange Commission (SEC) has approved the guidelines on securities lending and short selling in a bid to boost market activity.
The framework will now be implemented by the Capital Markets Integrity Corp (CMIC), the independent market regulation arm of the Philippine Stock Exchange (PSE).
The implementing guidelines of CMIC address concerns over the effect of securities lending and short selling transactions on trading participants’ books and records, error transactions, and the possible impact on trading participants’ risk-based capital adequacy (RBCA) ratio.
They also reiterate that short sale transactions shall be limited to “eligible securities” which shall refer to securities of companies comprising the PSE index and to exchange-traded funds.
It was noted that trading participants have the responsibility to ascertain that the parties have entered into the necessary borrowing arrangements prior to entering a short sale transaction.
The Commission En Banc approved implementing guidelines on 17 December 2019 subject to particular amendments outlined by the SEC Markets and Securities Regulation Department.
However, the Commission also outlines that it would not hesitate its right to suspend or prohibit short selling in an exchange when necessary for the protection of investors.
The SEC earlier approved the Philippine Stock Exchange’s (PSE) guidelines on short selling transactions in an En Banc meeting on 5 June 2018.
The guidelines follow the expansion of the Philippines’ securities lending market to include insurance companies in September 2019.
The Philippines' Insurance Commission stated in a circular that, as of September, insurance/reinsurance companies may conduct securities lending trades through direct lending, lending agent, lending pool systems or other schemes subject to the evaluation and approval of the commission.
The framework will now be implemented by the Capital Markets Integrity Corp (CMIC), the independent market regulation arm of the Philippine Stock Exchange (PSE).
The implementing guidelines of CMIC address concerns over the effect of securities lending and short selling transactions on trading participants’ books and records, error transactions, and the possible impact on trading participants’ risk-based capital adequacy (RBCA) ratio.
They also reiterate that short sale transactions shall be limited to “eligible securities” which shall refer to securities of companies comprising the PSE index and to exchange-traded funds.
It was noted that trading participants have the responsibility to ascertain that the parties have entered into the necessary borrowing arrangements prior to entering a short sale transaction.
The Commission En Banc approved implementing guidelines on 17 December 2019 subject to particular amendments outlined by the SEC Markets and Securities Regulation Department.
However, the Commission also outlines that it would not hesitate its right to suspend or prohibit short selling in an exchange when necessary for the protection of investors.
The SEC earlier approved the Philippine Stock Exchange’s (PSE) guidelines on short selling transactions in an En Banc meeting on 5 June 2018.
The guidelines follow the expansion of the Philippines’ securities lending market to include insurance companies in September 2019.
The Philippines' Insurance Commission stated in a circular that, as of September, insurance/reinsurance companies may conduct securities lending trades through direct lending, lending agent, lending pool systems or other schemes subject to the evaluation and approval of the commission.
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