BSP backs merger of PSE, PDEX

By Lawrence Agcaoili, The Philippine Star

Posted at Jul 18 2011 07:17 AM | Updated as of Jul 18 2011 07:12 PM

CEBU CITY, Philippines - The Bangko Sentral ng Pilipinas (BSP) is supporting the proposed unification of the country’s stock and bond markets that could enhance liquidity in the financial market.

In an interview with reporters, BSP Governor Amando M. Tetango Jr. said the proposed integration of the stock market being operated by Philippine Stock Exchange (PSE) and the bond market of the Philippine Dealing and Exchange Corp. (PDEX) could lead to economies of scale and a more efficient equities and bond markets.

“I support the merger of the PSE and PDEX,” Tetangco stressed.

He pointed out that the proposed unification could also enhance liquidity in the trading of outstanding issues since the investor base would be enhanced.

“There is the potential benefit in terms of economies of scale, of course. The overhead for the exchanges can be spread across more product lines and the public and financial institutions can consolidate accounts that they need to maintain to trade and settle,” he added.

He said the merger of PSE and PDEX would improve the market’s fund raising ability as more issuers would be encouraged to tap the unified market for fresh funds.

“This may also help in making any mispricing of credit risk more evident as both the sovereign and all corporate credit bonds would be seen issued and trading in one platform. This could also expedite any envisioned participation in regional bond or equity markets,” the BSP chief said.

He explained that the integration of the PSE and PDEX would result to a uniform rules in the trading of stocks and bonds.

According to him, other countries including Australia have unified stock and bond markets.

He cited the case of Australia where the bond market is under the overall operations of the stock market.

Finance Secretary Cesar Purisima earlier said the government sought the help of PSE chairman Jose Pardo to pursue the merger with PDEX that is partly owned by PSE.

“The development of the bond markets is something we’re trying to push also. In fact, one of the projects is really to have just one equity and bond market,” Purisima said in a speech earlier.

PSE owns 21% of Phlippine Dealing System Holdings, the owner of PDEX. Other shareholders include the Bankers Association of the Philippines, Philamlife and diversified conglomerate San Miguel Corp. (SMC).

PSE President Hans Sicat said it was ``logical’’ to merge the two because of the size of Philippine financial markets and the possibility that they could share a trading system.