PSE studies ways to address single-industry ownership cap

The Philippine Stock Exchange (PSE) is hatching ways to dilute stockbrokers’ cumulative ownership of the bourse to 20 percent, the single-industry ownership cap prescribed by securities regulations and a key hurdle in its bid to take over the Philippine Dealing System (PDS) Holdings Group.

Among the options include issuing shares to new investors via private placement or offering voting preferred shares. But one measure that can be easily executed, subject to the approval of the Securities and Exchange Commission (SEC), would be to exclude shares of dormant stock brokers from the pool of shares counted as held by stockbrokers.
At present, stockbrokers or trading participants collectively own about 27.9 percent of PSE’s stocks.

“We’re exploring several options. On the surface, the easiest is to convince some brokers to sell their shares to non-brokers. Failing that, we have to go to the next step… there could be a private placement of shares or we could offer preferred voting shares,” PSE president Ramon Monzon told reporters.

“The thing is we have a few inactive brokers that are not trading right now who own shares and are being counted as part of the 27.9 percent. So we’re having dialogues with the SEC to have these shares taken out [of the computation of collective brokers’ shares],” he said.

Monzon said there were 12 to 15 non-operating stock brokerage houses that owned shares equivalent to 3.4 percent of total stock. If these shares were taken out of the pool, “that will make the job easier,” he said.

The PSE is also discussing with the SEC the possible relaxation of rules against the trading of PSE shares by stock brokers. Because stock brokers are in excess of the 20 percent single-industry limit, they are not allowed to buy or sell PSE shares for their own account. They can only trade PSE shares on behalf of clients.

As such, Monzon said PSE shares were really “artificially determined” right now instead of “market-determined.”

“Maybe brokers have no incentive to sell because the price is very low. If it’s market-determined price, maybe many brokers will consider selling, then we don’t have to go to the other steps to bring down the threshold,” Monzon said.

The SEC is willing to give PSE one year to comply with the single-industry limit.—DORIS DUMLAO-ABADILLA