PSE: securities lending, higher public float to raise market liquidity

MANILA, Oct. 15 (PNA) — The Philippine Stock Exchange (PSE) is pushing the development of securities lending and borrowing (SLB) program that can increase the overall market liquidity by up to 10 percent.

PSE President and Chief Executive Officer (CEO) Hans Sicat cited academic studies as well as the empirical evidence showing that securities lending can raise market liquidity anywhere from 5 to 10 percent.

“I think that it has much more sustainable impact than a one-off thing,” he told reporters on the sidelines of the Securities and Exchange Commission (SEC)-PSE corporate governance forum 2015 on Thursday.

The SBL program involves lending of shares of a company to the borrowing party at a certain period of time.

Sicat raised this issue following Finance Cesar Purisima’s proposal to increase the minimum public ownership requirement for publicly listed companies to around 30 percent from the current 10 percent.

“It’s always a common theme. I think the conventional wisdom is that higher public float obviously gives options for investors. I think at this stage, we are a little bit more focused on trying to drive liquidity higher,” he said.

Sicat believed that market liquidity can be enhanced through increasing average daily trading volumes or value of shares traded every day.

“(We can) also increase the number and types of products that we have,” he added.

PSE was looking at other activities or products such as short-selling in the new trading platform. Through short-selling, a seller hopes to generate profit from an expected decline in price of sold stocks. (PNA)