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THE
Philippine Stock Exchange (PSE) has proposed new rules
on exchange-traded funds (ETFs), considered as
sophisticated forms of securities that are gaining
popularity in stock markets overseas.
PSE
president and chief executive officer Francis Lim said
the set of rules was submitted last week to the
Securities and Exchange Commission (SEC) for final
approval. The PSE made the submission after it completed
consultations with the public on the draft rules.
An ETF
holds assets such as stocks, bonds or futures.
Institutional investors can redeem large blocks of
shares of the ETF (known as “creation units”) for a
“basket” of the underlying assets or alternately
exchange the underlying assets for creation units. This
creation and redemption of shares enables institutions
to engage in arbitrage and causes the value of the ETF
to approximate the net asset value of the underlying
assets.
Based on
data gathered by the PSE, there are over 1,000 ETFs
being traded in over 40 overseas stock markets. These
ETFs have assets valued at over $700 billion, but not
one of them is listed in the PSE.
“We in
the PSE Board now want to fast-track the introduction of
the ETFs as part of a program to develop the local
capital market by expanding our menu of products and
services,” Lim said. “But we cannot just rush the entry
of ETFs. We have to put in place clear and responsive
rules to assure the orderly entry of the ETFs and tap
them as tools for our market’s growth.”
The
improved rules carried a number of changes to some of
the provisions in the original version of the rules.
Under the original draft rules, for an ETF denominated
in Philippine pesos, at least 25 percent of its share
capital or trading unit should be held by at least 250
security holders. This listing requirement was removed
from the refined draft rules.
Originally, the minimum number of ETF beneficial owners
was pegged at 250, and this requirement was to be met
from the date of listing. The refined draft rules cut
down the required number of beneficial holders to 200
while, at the same time, gave an ETF one year from
listing date to meet the required minimum number of
beneficial owners. “We have decided to ease this
requirement after we received feedback from concerned
groups that the original requirement regarding the
minimum number of beneficial owners was too restrictive.
We have heeded the suggestions, because we don’t want
our rules to pose a hindrance to the growth of the ETFs,”
Lim said.
The
draft rules also propose to give the PSE the flexibility
to adjust from time to time the minimum number of
beneficial owners. |
