The Securities and Exchange Commission said it prefers an equal merger of the equities and fixed income exchanges, instead of a buyout proposed by the Philippine Stock Exchange.
SEC commissioner Ephyro Luis Amatong said in a news briefing the government envisioned the unification of the Philippine Stock Exchange and the Philippine Dealing System Holdings Corp. where all shareholders of both exchanges would remain shareholders of the merged entity.
“What was discussed in the past with secretary of Finance and Bangko Sentral ng Pilipinas was a merger of equals or direct combination of PSE and PDS and the ownership would have distributed to all existing shareholders and no one would have sold out,” Amatong said.
Amatong said under this structure, the resulting ownership would not have required exemptive relief, as the ownership of shareholders of combined entity would be below the 5-percent maximum limit for individuals and also below the 20-percent limit for an industry group.
“The idea was ownership of the combined entity would have been distributed among all stakeholders,” he said.
PSE earlier offered to buy out all existing shareholders of PDS Holdings, after which PDS Holdings would become one of the existing subsidiaries of the local bourse. SEC rejected the PSE’s planned acquisition of additional shares in PDS Holdings.
The buyout requires an approval from the SEC because the Securities Regulation Code set a mandatory ownership limit in an exchange of 5 percent for an individual investor and 20 percent for an industry group.
Amatong said the SEC also rejected the PSE’s petition to acquire more shares in PDS Holdings because it failed to substantiate claims that the acquisition would result in operating and cost efficiencies.
PSE also failed to demonstrate that the consolidation would result in meaningful benefits for the investing public, he said.
Amatong said PSE only committed to a marginal decrease of 0.001 to depository fees and did not even commit to keep present fees that both exchanges were currently charging.
He said documents filed by PSE with SEC also failed to present a clear vision for the fixed-income market and did not show any capital investment plan to improve the quality of its own infrastructure in case of repeated trading glitches.
Meanwhile, PSE said the decision of SEC to reject its planned acquisition of additional shares in PDS Holdings would have no material impact on the operations of the exchange.
“The company remains committed to producing more products and services and promoting efficiencies in the market, and thus will vigorously pursue plans and strategies to advance this commitment,” PSE said.