Mac Murray

Equities Trading in the Philippines

The following is excerpted from the Philippine Stock Exchange website for your convenience:

PSE


Equities Market

TRADING SCHEDULE

Trading in the Philippine Stock Exchange is in one continuous session daily except Saturdays, Sundays, legal holidays and days when the Bangko Sentral ng Pilipinas (BSP or formerly Central Bank of the Philippines) Clearing Office is closed. Trading of Equities begins at 9:30 a.m. and end at 12:00 p.m. with a ten-(10) minute extension. The Exchange has two trading centers: one in Pasig City and another one in Makati City.

UNIT OF TRADING

Trading of shares shall be in terms of fixed minimum amounts called board lots. Depending on the price range of a particular stock, the unit of trading ranges from 10 to 1,000,000 shares. Cost of transaction therefore varies from company to company since prices of each company differ according to its par value.

Prices of stocks move through a scale of minimum price fluctuations. Prices are thus adjusted by only one minimum fluctuation at a time. Transactions that are beyond the prescribed number of minimum fluctuations from the last sale price are not allowed. In case of cross sales, transactions may be made through two minimum fluctuations provided the price is within the best bid and offer.

For purposes of easy trading, the PSE shall fix the board lot for each listed issue. The PSE shall set the table of board lots and make amendments as the situation warrants. Board lots shall be automatically updated every end of the day based on the closing price of that particular issue and in relation to the existing schedule of board lots to be made effective the following trading day. Whenever board lots are updated, it shall be the responsibility of the brokers to update their affected Good-Till-Canceled (GTC) orders.

Trading in units lower than the minimum standard unit of trading or the so-called “odd-lot” trading is also allowed. Odd lots are due to fractional issuance of stock dividends or special sales arrangements or when what was once a board lot becomes an odd lot because of a change in the price range.

All special block sales should first be approved by the Floor Trading and Arbitration Committee. The transaction value of the subject of the block sale currently must not be less than P20 million. A transaction is defined as one entry to the system. However, a block sale involving one listed issue to be done at two different prices shall be counted as two transactions. Each of the transactions must be more than the minimum amount to qualify as a block sale.

METHOD OF TRADING

The method of transaction is a double auction market between a buyer and a seller who are represented by stockbrokers. Stock trading is fully automated and scripless.

PRICE FREEZING LIMIT

Orders to be posted shall be limited to a maximum of three fluctuations from the last traded price and a capitalization of P30 million per order. Brokers may, however, impose their own limits per order for their trades.

Limit orders shall be executed at a price band within the floor (minimum) and ceiling (maximum) price limits established by the Exchange for each security. Outside the trading band, the price of the security shall be automatically frozen. This band is set at not more than 50% up and not more than 40% down on a particular day, to be reckoned from the last closing price (excluding special block sales) or at last posted bid price, whichever is higher. In case of an issue that has not been traded for the last six (6) months, the last special block sale or a negotiated sale price, shall be considered the last traded/closing price. The trading system does not accept the price of a security that falls outside the trading band.

Only when the Exchange is satisfied with the justification of an official announcement from the company or the proper government agency and duly published and disseminated for the information of all member-brokers will the freeze be lifted subject again to the trading band rule.

MARGIN TRADING

A broker or dealer must not extend credit to a client beyond 50% of the current market price of the security at the time of transaction. In the event that the equity is P50,000.00 or less, the broker shall not extend new or additional credit to said account. A customer must maintain a margin of at least 25% of the current market value of all securities “long” in the account and 30% of the current market value of securities “short” in the account.

NON-RESIDENT TRANSACTIONS

Securities dealers/brokers may undertake stock transactions, whether arbitrage or investment, even without prior BSP approval. However, when the purchase/sale of Philippine shares of stock involves a non-resident, whether the transaction is effected in the domestic or foreign market, it will be the responsibility of the securities dealer/broker to register the transaction with the BSP. The local securities dealer/broker shall file with the BSP, within three (3) business days from transaction date, an application in the prescribed registration form. After compliance with other required undertakings, the BSP shall issue a Certificate of Registration. Under Bangko Sentral rules, all registered foreign investments in Philippine securities including profits and dividends, net of taxes and charges, may be repatriated.

SETTLEMENT

All Exchange trades in listed securities are reported, confirmed and settled through the Securities Clearing Corporation of the Philippines (SCCP), pursuant to its rules and procedures, unless otherwise exempted by Exchange or Government laws, rules and regulations.

Equity trades are settled on the third day after trade date, i.e., T+3 through Delivery-versus-Payment (DVP) Settlement System. As such, cash and/or securities obligations must be paid and/or delivered to the settlement banks (either Equitable PCI Bank, Inc. or Rizal Commercial Banking Corporation) and the Philippine Central Depository not later than 12:00 noon of the settlement date.

CLEARING AND TRADE GUARANTEE FUND

A fund called the Clearing and Trade Guarantee Fund (CTGF) has been established and is being administered by SCCP. The fund, which is important in risk management, is intended to cover obligations of a Member who has defaulted due to temporary illiquidity, insolvency or bankruptcy. These obligations include all SCCP-eligible trades executed in the Philippine Stock Exchange that are scheduled to settle on the day of the default plus all Compared Trades that have not yet reached their scheduled settlement date.

Return to Due Diligence Helps

.

E. M. Murray.  Customized Stock Portfolios.  Professional Management.  Fixed Downside Risk.

E. M. Murray. Customized Stock Portfolios. Professional Management. Fixed Downside Risk.

Advertisements
%d bloggers like this: