THE Securities and Exchange Commission (SEC) has set a minimum unimpaired paid-up capital of P150 million for trading participants seeking to act as market makers under new rules aimed at improving liquidity and trading activity.
The SEC issued Memorandum Circular 28, Series of 2026, on Oct. 15, establishing a regulatory framework for market making in equity and fixed-income securities listed, traded or enrolled on exchanges under its jurisdiction.
Market makers are trading participants who continuously quote buy and sell prices for securities in their inventory, helping ensure market liquidity and support orderly trading.
SEC Chairman Francis Lim said the new framework aimed to encourage more active trading in the secondary market.
“Establishing a robust market making framework is an important milestone in our efforts to boost trading activity in the Philippine capital market,” he said.
“We expect this framework to help reduce frictions in secondary-market trading, support more efficient price discovery, and foster a more competitive trading environment for both domestic and international investors,” Lim added.
Under the new rules, only trading participants accredited or recognized by the relevant exchange may qualify as market makers, and they must have at least P150 million in unimpaired paid-up capital, or a higher amount if required by the SEC. They must also demonstrate adequate operational capacity and a satisfactory track record.
Each accredited firm must also designate at least one specialist with at least three years of relevant securities trading or market-making experience, or equivalent qualifications based on certifications, training and demonstrated proficiency.
Market makers in equities are required to maintain firm two-sided quotations for a minimum portion of the trading session, with the specific period and required market participation determined by the exchange. Quotes must generally be firm and executable, subject to exceptions such as system failures, market-wide disruptions and force majeure.
For fixed-income securities, exchanges will set quotation parameters based on factors including the type and characteristics of the security, trading mechanisms, market conditions and the security’s relative liquidity. Exchanges will also determine whether quotations are firm, indicative or on a best-efforts basis, as well as how long they must be maintained.
To encourage participation, exchanges must provide incentives that may include reduced transaction fees, liquidity rebates and access to enhanced trading facilities.
Market makers will be required to maintain records of orders, trades, quotations, inventory positions and other information required by the SEC and exchanges. Exchanges must also submit quarterly reports to the commission covering market-maker performance, compliance, disciplinary actions and enforcement measures.
Finance Secretary Frederick Go said the rules would help deepen the domestic capital market and bring the country’s regulatory framework closer to international standards.
“A deeper and more liquid capital market gives investors greater confidence to participate, enables businesses to raise more capital, and channels private investment into productive sectors that create jobs and support long-term economic growth,” he said.
The rules exclude market-making activities in government securities covered by the Bureau of the Treasury’s Primary Dealer framework, unless the SEC extends their application in coordination with the bureau.
Trading participants already engaged in market making will be given a six-month transition period to comply from the date the new rules take effect. Exchanges must submit their implementing guidelines to the SEC for approval within 30 days from effectivity.
NAZYLEN JOY MABANGLO
