THE Philippine Stock Exchange (PSE) is preparing to issue proposed changes to exchange traded fund (ETF) rules as part of efforts to expand the range of investment products and improve market liquidity.
The planned amendments include the admission of actively managed ETFs, lower capitalization requirements for issuers and greater flexibility in the types of collective investment schemes that can list on the exchange.
Under the revised rules, collective investment schemes, including umbrella funds and unit investment trust funds (UITFs), may list multiple sub-funds under a single ETF issuer.
The exchange will also allow the listing of different types of securities, such as fund units, in addition to shares of an ETF company.
The proposed amendments will reduce the capitalization requirement for ETF issuers to P50 million from P250 million. For investment companies with at least a five-year track record, the minimum could be lowered to as little as P1 million.
The rules will also permit ETF issuers to appoint only one authorized participant for the creation and redemption of ETF shares or units. Market makers will no longer be required to be authorized participants.
In addition, the revisions provide clearer guidelines for ETFs tracking foreign exchange-listed securities.
“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.
Apart from ETF reforms, the exchange is developing rules for a negotiated trade reporting facility, which would allow brokers to execute certain trades through a separate facility similar to those used in other markets.
The proposed facility is expected to improve liquidity and facilitate the movement of funds in the market, according to the exchange.
The PSE and its wholly owned subsidiary, Philippine Depository and Trust Corp. (PDTC), are also working with market participants on amendments to securities borrowing and lending (SBL) rules that will allow directed pooled lending through PDTC’s SBL facility.
The amended SBL rules were submitted to the Securities and Exchange Commission on April 16 and are intended to make it easier for foreign institutions to participate in the domestic securities lending market.
Both the ETF and negotiated trade reporting facility rules will be released for public consultation.
