SEC shortens settlement of stock trades to just 2 days

MANILA  -The Securities and Exchange Commission (SEC) raised the Philippine capital markets closer to global standards after cutting the payment cycle for stock market trades to two days from three days.

The shortened settlement cycle means stock purchases by a customer in a cash account should now be paid in full within two business days after the trade date. This was compared to the previous rule allowing three days, per the amendment on Securities Regulation Code (SRC) Rule 50.

The new settlement regime was implemented on Aug. 24 this year.

The SEC said this would allow investors to receive proceeds from securities trades within two days. This also meant exposure for trading participants would be reduced by one day, it added.

“This will reduce the credit and market risks of unsettled trades, as well as liquidity risks in the payment system, thus reducing the overall systemic risk for the capital market,” SEC chair Emilio Aquino said in a statement.

“The shortened settlement cycle is in line with global standards and supports our mission to facilitate cross-border trading and encourage more investors to trade in the local stock market,” Aquino said.

The SEC also revised the rule on computation of net liquid capital and SRC Rule 52, which deals with the monthly aging of customers receivables and the appropriate allowance for doubtful accounts.

Amendments were likewise made to reflect changes to the computation of net liquid capital and the schedule for specific and general provisioning for overdue accounts, the corporate regulator said. INQ