PSE, insurance firms in talks to launch SBL

The Philippine Stock Exchange is working with the insurance industry to supply the stocks needed to fuel securities borrowing and lending (SBL), a capital market activity common in global markets that helps boost trading liquidity.

In a briefing on Friday to mark the PSE’s 10th year as a listed company, PSE president Hans Sicat said the bourse was in talks with the Insurance Commission to allow insurance companies to lend part of their portfolio, particularly the more liquid securities, to the market for SBL purposes.

SBL refers to the lending of stocks from an investor’s portfolio to a borrower who needs the stocks for settlement obligations to support trading strategies.

It involves the physical transfer of shares to the borrower while the lender still retains certain rights accruing to the shares of stocks lent.

In other markets, it helps improve stock and bond market liquidity through the creation of more sophisticated trading strategies and introduction of derivative instruments.

This is also in line with the PSE’s plan to bring equities-linked futures to the local market following the recent introduction in the Singapore Exchange (SGX) of a futures index with PSE-listed equities as underlying instruments.

“Once the legal framework as well as perhaps taxation framework that govern will be aligned with current global practices, if that happens, I think we have a good shot at launching it by 2014. It’s a work in progress,” Sicat said. Doris C. Dumlao