Securities lending is a priority focus area for the
Philippine Stock Exchange (PSE) exchange this year, according
to the head of the country’s major bourse.
Hans B. Sicat, PSE’s president and chief
executive, told Global Investor/ISF that the country
has yet to experience the "full vibrancy" of securities
borrowing and lending (SBL).
He hopes that will start to change in 2017, noting that PSE
executives are currently in the process of drafting
implementing guidelines for short selling along with a list of
"The PSE realises the need for increased access to SBL,"
Sicat said. "Based on the experiences of exchanges in
neighboring countries, the SBL facility improved liquidity when
institutional investors started to join the program.
"Increasing the supply available for securities lending and
getting our short selling program off the ground are priority
initiatives of the exchange."
The general regulatory framework for securities borrowing
and lending (SBL) in the Philippines was put in place in
However, at present, SBL is bilateral or is transacted
directly between the lender and the borrower.
There are currently no registered lending agents in the
country who act as SBL intermediaries in other markets.
Under existing rules, trading participants who wish to
conduct SBL transactions should enter into a master securities
loan agreement (MSLA) among themselves and register this
with the Philippine tax agency, the Bureau of Internal Revenue,
for the SBL transaction to be tax exempt.
"SBL volumes in the local stock market have been growing but
the number of transactions is really driven by demand for fails
settlement management," Sicat added.
"We have been in regular contact with international banks
throughout the development process of our SBL and short selling
"We think that there is significant interest, which we hope
to realize by providing regulations that will be acceptable to
Meanwhile, pension funds and insurers have expressed their
interest to participate in the PSE’s SBL
For instance, the Insurance Commission issued guidelines to
allow insurance companies to participate as lenders in
securities borrowing and lending transactions.
"We are beginning to see the landscape change in regards to
more and more owners actively participating in lending,"
said Brian Leung, equities trading & client
development, APAC, agency securities lending, Deutsche
"While it would be unfamiliar territory for many funds
entering the market for the first time, they remain
tremendously enthusiastic to partner with proficient lenders
that can tailor their programme to suit their exact needs and
guidelines while extracting meaningful return."
PSE's Sicat hopes that the exchange can more
institutions to participate once the short selling program
starts and the bourse launches a more focused market education
program for this facility.
He added that the PSE recently assisted the insurance
commission in establishing guidelines which allowed insurance
companies to invest in ETFs.
PSE has grown significantly over the past 13 years.
Statistics from the World Federation of Exchanges (WFE) show
total value of shares traded reached US$40bn in 2015 from only
US$3.2bn in 2004.