MANILA, Philippines (UPDATE) - The Department of Finance and the Securities and Exchange Commission may differ on a brewing controversy between the Philippine Stock Exchange (PSE) and the Philippine Dealing System (PDS).
The PDS controls key parts of the country's peso- and bond-trading systems. It also, for now, handles depositary for the PSE. Depositary is the back-office function of trading, including the transfer of ownership between seller and buyer.
The PSE yesterday said its Securities Clearing Corp. of the Phils. unit got a conditional depositary license from the SEC. Depositary fee revenue is rising as stock trading picks up amid increased local and foreign investment.
In an interview with ANC, Finance Secretary Cesar Purisima said competition may be good to bring down fees, but that consolidation may be advisable because of the relatively small size of the Philippine financial market.
"The license to operate a depositary is never exclusive," SEC Chairwoman Teresita Herbosa said in another interview. "As long as they meet requirements, we will consider their application."
She said competition could lower fees and that the size of the market was not necessarily an issue. "It doesn't depend on size of the market, but how fast and efficient you can serve it."
Purisima and Herbosa spoke on the sidelines of today's Philippine Economic Briefing at the PICC.
"Fees from clearing operations will be positive for our bottomline," PSE president Hans Sicat asid in an interview, declining to be more specific.
He said there should have been talks about whether PSE should buy PDS' depositary unit.
"There have been discussions about how to go about this, should the PSE purchase the depositary operation. The license is a really good development for us," Sicat said.
In phone interviews yesterday, PDS Chairman Vicente Castillo told ANC he would appeal to Purisima. He said the Philippine financial market is relatively small for two depositary companies, and that even the U.S. has just one.
He also said that stock and bond depositary should be unified to help expand the financial markets, by facilitating the use of bonds to collateralize stock purchases. He also said PDS had authority from SEC and the Bangko Sentral and that the PSE should have both as well.
"If they want competition, we are ready, but under the same rules," Castillo said.
He also said PSE, a PDS stockholder and board member, may have broken its fiduciary duty to PDS by competing with it.
"Our shareholders may not take this sitting down," Castillo said. "The (PSE) are on our board. They know how we operate. We will ask the secretary of finance to intervene."