The Philippine Stock Exchange (PSE) has started seeking public comments for its recently released proposed rules on Exchange Traded Funds (ETFs).

In a PSE memorandum, it was stated that the Board of Directors of the exchange has approved the release for public comments the proposed ETF rules.

Under the first part of the rule, an ETF company, an open-ended investment company that issues and redeems index fund that is traded on stock exchanges, shall appoint at least two authorized participants who shall have a minimum capital requirement of P100,000.

As for the general criteria for admission to listing, the listing rule indicated that an ETF applying to list in the exchange shall have a minimum paid-up capital of at least P250 million.

“When the registration of the ETF’s securities becomes effective and its listing application is approved by the exchange, the ETF may, at its option, undertake an offering for its securities,” the provision on listing of the proposed rules said.

The offering referred to will not be covered by the Initial Public Offering Rules on Distribution of Shares, including the provisions pertaining to the 20-percent mandatory allocation for trading participants and 10-percent mandatory allocation for local small investors.

“The lock-up and track record requirements in the listing rules shall not apply,” it added.

For the disclosure part, the PSE said that the same rules on the usual stocks being traded in the
exchange, all prospectus, press releases, and other similar documents shall be submitted first to the exchange for review and disclosure purposes.
ETFs are also subject to the minimum and public ownership (MPO) rule of the PSE.

“The ETF shall maintain a public ownership of 10 percent of the issued and outstanding shares, exclusive of treasury shares, or such other number a the exchange may from time to time prescribe; provided that newly listed ETF shall have a period of one year from listing date within which to comply with the said requirement,” Item A, Section 6 of the proposed PSE ETF rules specified.

For non-compliance of the public ownership rule, the ETF shall be penalized with fine of P100 for every trading day of non-compliance after the lapse of the one-year period from listing date.

The ETF is also subject to suspension after six months of non-compliance to the MPO rule, and if the ETF remains non-compliant upon the lapse of the trading suspension, the exchange shall initiate delisting procedures.

The other proposed ETF are posted at the local bourse’s website.

The proposed PSE ETF rules are in line with the rules and regulation on ETFs issued October 22, 2012 by the Securities and Exchange Commission in its Memorandum Circular No. 10, series 2012.

The exchange is inviting all concerned parties to give their comments to the proposed ETF rules. The PSE will be entertaining comments until January 18, 2013.