The Philippine Stock Exchange (PSE) is waiving the transaction fees of market makers as they trade shares of exchange traded funds (ETFs), as the local bourse aims to promote the ETF market in the country.
“The approval of Part C of the ETF Rules by the Securities and Exchange Commission [SEC] brings us a step closer to finally offering ETFs to the investing public. Given that market making is a novel practice in our market, we want to incentivize participants at this point to help encourage more traders to consider being a market maker for ETFs,” said Hans Sicat, PSE president and chief executive officer.
“This is consistent with practices of exchanges in other countries to help promote liquidity in their markets,” he added.
The PSE collects a transaction fee equivalent to 0.0005 percent of the value traded of shares listed at the exchange. Under the ETF rules of the SEC, at least one of the designated authorized participants of the ETF should act as a market maker, the exchange cited.
The main role of a market maker is to ensure sufficient liquidity in the market, while obligations include posting orders when there is a wide spread between the best bid and offer of an ETF, and maintaining a minimum presence in the market.
Only authorized participants who apply and accomplish requirements set by the PSE and the SEC are eligible to trade ETFs as market makers.
Madelaine B. Miraflor