THE Philippine Stock Exchange’s (PSE) proposed negotiated trades facility would address a long-standing gap within the local equity market by allowing certain legitimate pre-arranged transactions that can not be executed under the exchange’s existing trading rules, in keeping with analysts.
“The PSE’s proposal to introduce a negotiated trades facility is a constructive and timely market structure reform that addresses a long-standing execution gap within the Philippine equity market,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message on Thursday.
In a consultation paper released on July 1, the PSE proposed a negotiated trades facility as a brand new execution venue for pre-arranged transactions that fall outside the exchange’s current block sale and cross transaction rules.
Under the present framework, regular block sales require a minimum transaction value of P20 million and should be executed inside 5% above or below the reference price (previous closing price or the last adjusted closing price following corporate actions), while special block sales require a minimum transaction value of P50 million.
Transactions below those thresholds may as a substitute be executed as cross transactions, provided the agreed price falls inside the very best bid and offer (BBO).
In line with the exchange, there may be currently no mechanism for executing pre-arranged trades that satisfy neither requirement.
“One in all the restrictions of the present framework is that certain legitimate pre-arranged transactions can’t be executed efficiently in the event that they fail to satisfy the minimum size for block sales or fall outside the very best bid and offer required for normal cross transactions,” Mr. Arce said.
The proposed facility would haven’t any minimum value or volume requirement and would allow negotiated trades to be executed during a 15-minute window after the Run-Off/Trading-at-Last session, subject to a price inside 5% above or below the full-day volume-weighted average price (VWAP) and a one-firm trade requirement.
Mr. Arce said those safeguards would supply greater flexibility without compromising market integrity.
“The negotiated trades facility fills this gap by allowing these transactions to occur inside clearly defined pricing boundaries and thru the exchange’s infrastructure reasonably than forcing participants to restructure transactions or delay execution.”
“These safeguards strike an inexpensive balance between providing execution flexibility and maintaining confidence within the integrity of market pricing,” he added.
BDO Securities Corp. President John Tristan D. Reyes also welcomed the proposal.
“For me, it is a welcome proposal. It allows more flexibility and transparency for investors seeking to transact negotiated trades within the stock market.”
The exchange is accepting comments from trading participants and other stakeholders until July 7. — Alexandria Grace C. Magno