Local bourse rolls out new stock trading surveillance system

AFP PHOTO / Jay DIRECTO

MANILA, Philippines—The Capital Markets Integrity Corp., a self-regulatory organization tasked to police trading participants, has boosted efforts to build a “culture of transparency, integrity and compliance” with the rollout on Tuesday of a new surveillance system that detects unusual spikes in price and volume of listed stocks.

CMIC, a unit of the Philippine Stock Exchange tasked to curb stock price manipulation and insider trading, is headed by Antonio Garcia, a former president of the Manila Stock Exchange. By hiring someone who knows the ins and outs of stock brokerage, the PSE said it aimed to put the CMIC off to a good start.

With its self-regulator status, the CMIC has the power to sanction erring member-brokers such as with suspension, fines or revocation of license but recommendations for court prosecution must be referred to the Securities and Exchange Commission.

On Tuesday, the CMIC launched its state-of-the-art surveillance system dubbed “Total Market Surveillance” or TMS, which was developed by the Korea Exchange (KRX).

“My dream is we will get to a point where we don’t have to sanction any of the trading participants because they will be following the rules,” Garcia said.

To date, Garcia said, delinquency among trading participants has “been minimized, and that will be gone in a short time.”

For the TMS, Garcia said, the CIMC picked the best features of the surveillance system that was developed by KRX.

“We like their system. It’s very advanced and we customized it to Philippine conditions,” Garcia said, adding that even the KRX had noted that after the PSE’s enhancements, the local system was now “even better” than South Korea’s original system.

Integrated into the TMS are features such as detection rules, statistics analysis models and pattern recognition logics seen as crucial for maintaining a fair and orderly market. At the minimum, the system is designed to support a market of one million orders/trades per day.

“We trust that, with the establishment of the system, together with the essential collaboration of trading participants, the confidence of the investing public in capital market institutions shall be
reinforced further and a more active and vibrant market participation will be truly promoted,” said CMIC chairman Jose Luis Javier.

CMIC now has a full complement of 24 people in four departments,  with surveillance, audit, enforcement and administrative functions.

“As markets become more vulnerable to manipulation and price distortions, no exchange can exist without an efficient and state-of-the-art surveillance systems. With surveillance comes vigilant monitoring and effective deterrence,” said SEC chairperson Teresita Herbosa who graced the launch of the TMS.

Herbosa said the SEC itself would likewise soon acquire its own surveillance system to boost the fight against market abuses. But apart from alerts generated from surveillance systems, she said
regulators would also act on tips, complainants and referrals.

“The full rollout of the TMS system affirms CMIC’s role in enhancing market integrity and transparency. We also share CMIC’s advocacy in promoting investor education as we jointly develop a progressive
Philippine capital market,” PSE chair Jose Pardo said.

Veteran stock broker Ramon Garcia, who was PSE president in the 2000s, said CMIC “should not only act as policement but should commend good performers among brokers and it should create suitable environment to encourage more investors to participate in the market.”

The former PSE chair said joint efforts should be made between CMIC and brokers to increase the number of investors, which as of latest count was less than 1 percent of the Philippines’ 95-million population.