THE Department of Finance (DOF) now permits the unrestricted trading of government securities and allows the transfer of these government securities between tax-exempt and taxable entities.
Finance Secretary Cesar V. Purisima signed Department Order (DO) 68-2014 to allow the transfers of government securities across the different tax categories, which was previously disallowed.
Under the new DO 68-2014, the Bureau of the Treasury (BTr) may allow transfers across tax categories provided that it can track such transfers for tax and other purposes.
The BTr said the nonrestricted trading of peso-denominated government securities was meant to enhance trading liquidity, promote price discovery and ensure sound securities settlement for the government securities market.
The BTr said the lifting of the restrictions on trading of government securities is part of the effort to unify the market that had previously been segmented into taxable and tax-exempt sectors.
“With the DOF’s lifting of restriction in securities transfer to allow trading between and among taxable and tax-exempt investors, this initiative will see an increased number of market players being able to participate in secondary market trades for government securities, thereby forming a vast pool of liquidity for the entire investing community,” the BTr said in a statement.
“Tax-exempt institutions will also benefit from the initiative, as they are now given access to price discovery and efficient settlement infrastructure long enjoyed by the active taxable sector of the market. The government believes that this initiative will give rise to the development of new capabilities that should positively impact the best practices in portfolio investments and hedging strategies of both taxable and tax-exempt investors alike,” the BTr added.
Purisima’s new department order also allows the BTr to use a system that will be cleared by the Bureau of Internal Revenue as to its capability to accurately calculate and account for the appropriate taxes on relevant coupon periods of government securities that are transferred across the different tax categories.