The Philippine Stock Exchange plans to institutionalize short-selling of stocks by the second half of the year, beginning with some of the country’s largest and most liquid companies.
However, PSE president Hans Sicat said the exchange should first convince government financial regulators to support the mechanism for securities borrowing and lending (SBL).
Sicat said the PSE had “figured out the operating parameters,” involving even the Insurance Commission to promote this initiative because insurance companies were the natural lenders.
He said there was a lot of interest among pension funds and insurance companies regulated by the IC to participate in this short-selling program, which would allow investors to sell stocks they did not own yet by borrowing the underlying securities.
Short-selling is allowed under the Securities Regulation Code but what the PSE is now doing is recognizing such trade under certain parameters, said PSE chief operating officer Roel Refran.
“For us, it’s a very basic product,” Sicat said, noting that the mechanism would be launched after the introduction of PSE’s new trading engine to ensure that the systems would be consistent.
Sicat said it would be better to “start off with a smaller universe” so the market could practice. This means the PSE would initially allow only stocks under the 30-member Philippine Stock Exchange index as underlying equities for short selling. Doris C. Dumlao