Unification of stock, bond exchanges pushed

MERGER The PSE and PDEx are set to unify their respective exchanges to make the Philippines’ capital market more globally competitive.

Leaders of the Philippine Stock Exchange (PSE) and Philippine Dealing and Exchange Corp. (PDEx) have started discussions on the unification of the country’s stock and bond exchanges to make the domestic capital market more globally competitive.

The initiative to unite the PSE and PDEx has long been floated but it was particularly boosted by a recent prodding from regulators, banking sources said. In a recent forum, for instance, Finance Secretary Cesar Purisima announced that he was supportive of the move to merge the two trading platforms.

Bankers said there were now discussions within the Bankers Association of the Philippines (BAP), which controls the fixed income exchange, on how to heed regulators’ suggestions to unify the two exchanges.

In an interview, PSE chairman Jose Pardo confirmed that there were discussions between the PSE and the BAP on the matter. “It does make sense to have two platforms fused. How the fusion will happen will be the subject of negotiations,” Pardo said.

“Talks are progressing, which is a good sign,” he told the Inquirer.

The PSE chairman said the parties would look for guidance from Purisima and the Bangko Sentral ng Pilipinas (BSP) on what would be the ideal organization for a unified stock and equity platforms.

The ideal equity setup, Pardo said, should broaden the ownership base “for as long as the end result is a structure that will inspire further confidence in the capital markets.”

The BSP has thrown its support to the proposed merger of the country’s stock and bond markets, saying consolidation would redound to efficiency of operation.

BSP Governor Amando Tetangco Jr. told reporters Saturday that merging the PSE and the PDEx would benefit the investing public since they would only have to go to one market for their bond and equity investment requirements.

“We support that idea. That will make the market more efficient,” Tetangco said. “Another advantage of a merger is that there will be uniform rules in trading stocks and bonds.”

Vicente Castillo, chairman of PDEx parent firm Philippine Dealing System Group (PDS), has long been a proponent of the union. He had said that such unification would provide the scale needed by local firms to raise funds easily from investors whether in the form of equity or debt.

Pardo said there were many ways to execute a union, whether through a merger or an acquisition by one of the other. He said there had been preliminary meetings with the bankers to pursue this initiative.

“It makes sense to put these together, to have a bigger balance sheet and property assets,” Pardo said, noting the union would build on each entity’s strengths and address the weaknesses.

Personally, Pardo said he would want to see this happen at the “soonest possible time” and hopefully within his term as PSE chairman.