PSE to ease ETF stock market listing rules

MANILA, Philippines – The Philippine Stock Exchange (PSE) is preparing another round of regulatory reforms, this time targeting the country’s underdeveloped exchange-traded fund (ETF) market as it seeks to attract more issuers and investors.

An ETF is an investment vehicle that trades on the stock exchange and tracks a basket of securities. Its shares are initially issued in large blocks to institutional investors, who later distribute them to retail investors through market trading.

READ: PSE eyes market-making rules overhaul

“We are working on reviving our ETF market and we hope these rule changes will provide the impetus for asset managers to structure and list ETFs,” PSE president and CEO Ramon Monzon said.

The bourse will soon release for public consultation proposed amendments to its ETF rules, following the publication earlier this month of recommended revisions to its market-making framework.

Among the key changes is the expansion of eligible ETF issuers. Under the proposed rules, collective investment schemes—including umbrella funds, which house multiple sub-funds under one investment company and unit investment trust funds—may list multiple subfunds under a single ETF issuer.

The revised framework will also allow the listing of different types of securities, such as fund units, in addition to shares issued by an ETF company. Actively managed ETFs, which are not limited to tracking an index, would likewise be permitted to list on the exchange.

The PSE also wants to significantly lower capitalization requirements for ETF issuers. The minimum capitalization will be reduced to P50 million from P250 million.

For investment companies with at least a five-year track record, the requirement may be lowered further to as low as P1 million.

Other proposed changes include allowing ETF issuers to appoint only one authorized participant to handle the creation and redemption of ETF shares or units.

Market makers would also no longer be required to serve as authorized participants.

READ: PSE drafts new market-making standards

The amendments likewise provide clearer guidelines for ETFs whose underlying indices track securities listed on foreign exchanges.

Beyond ETFs, the exchange is developing rules for a Negotiated Trade Reporting Facility, a mechanism that would allow brokers to execute trades through a platform similar to negotiable trading facilities used in other markets.

According to the PSE, the facility is intended to improve market liquidity and support a more efficient flow of funds.

The exchange is also pursuing reforms in the securities borrowing and lending market. INQ