The Securities and Exchange Commission denied the request of the Philippine Stock Exchange for a rule exemption that would have enabled the local bourse to acquire a majority interest in Philippine Dealing Systems Holdings Corp.
The SEC decision effectively stopped the PSE’s landmark deal to consolidate the local capital market infrastructure by purchasing other shareholders in PDS, which operates the fixed income exchange and securities depository.
The SEC in an executive meeting held Monday rejected the petition of PSE, citing the exchange’s “failure to present clear and convincing evidence” that it was entitled to an exemptive relief and that its acquisition of PDS would not negatively impact on the PDS’ ability to effectively operate in the public interest.
“This is without prejudice to any subsequent application by the PSE for similar reliefs in the future,” the SEC in a resolution said.
The PSE earlier obtained approval of PDS shareholders to acquire a majority interest in the company, subject to regulatory approvals.
Under the Securities Regulation Code, no single industry or business group should own more than 20 percent of an exchange. The PSE, thus, must request for exemptive relief from the rule.
The PSE on November 27 failed to obtain SEC approval for an exemptive relief after the corporate regulator asked for a more detailed information on the planned acquisition.
The PSE on January 26 submitted additional information regarding the deal. The PSE earlier said it remained hopeful its request for exemptive relief
would be approved by the SEC, adding the planned merger would boost liquidity in the capital markets and encourage more issuances.
The merger is expected to help the Philippines meet the requirements for a cross-border trading platform linking Southeast Asian stock markets.
The PSE offered to acquire majority stake in PDS Holdings based on an enterprise value of P2.25 billion.
Shareholders of PDS Holdings are the Bankers Association of the Philippines, San Miguel Corp., Golden Astra, Singapore Stock Exchange, Tata Consultancy Serves Asia, Computershare Technology Services, The Philippine America Life and General Insurance Co., Financial Executive Institute of the Philippines, Social Security System and the Investment House Association of the Philippines.
PSE president Hans Sicat earlier said the exchange might pursue plans to develop its own depository if the proposed PDS buyout failed to get regulatory approval.
The SEC in 2013 granted the Securities Clearing Corporation of the Philippines, a fully-owned subsidiary of the PSE, a provisional license to operate a securities depository.
The provisional license allows SCCP to operate an equities depository and will usher in the vertical integration of the key processes involved in securities trading.