• PSE-PDex merger delay could cost markets – Sicat


    DELAYS in securing regulatory approval for the proposed merger between the Philippine Stock Exchange (PSE) and the firm that operates the Philippine Dealing and Exchange Corp. (PDEx) could translate into a “missed opportunity” in terms of how the country’s capital markets would fare amid the Asean economic integration.

    Hans Sicat, president and chief executive officer of the PSE, said that pending the approval by the Securities and Exchange Commission (SEC) of its planned merger with PDex, the country’s capital markets would find it difficult to compete with its Asean counterparts.

    “Clearly we can compete with other Asean members. We know that, I guess everyone knows that. But is that the smartest thing to do? In a small market [like ours], probably not, because you are probably better off joining forces, jointly leverage on your assets, technology and human resources, right?” Sicat said.

    “By not empowering us to do this right now, then clearly we cannot have a relevant discussion on the Asean stage today. It is a lost opportunity, because if you agree that the economic policy of the country is still being competitive and being a part of the Asean story, [then]it is a missed opportunity,” he added.

    Part of the Asean blueprint, which started its process of integration last December 2015, is the eventual integration of the various capital markets in the region.

    “We have a lot of work to do,” Sicat said.

    He noted that it is only in the Philippines that the equities and bond market exchanges have not been integrated.

    “All other exchanges in the Asean, if not all other exchanges in the world, are integrated exchanges. We are one great example that ours is separated, so I guess that will tell you [something],” he said.

    The “timing issue” as to when the proposed merger would be approved plays a critical role, both with respect to the counter-parties in the intended merger as well as to the Asean integration, Sicat said, nothing that this is something the regulator appears to have overlooked.

    He explained that since the IT infrastructure systems cost hundreds of millions of pesos, the longer the approvals take, the more that the merger may no longer be attractive to all the counterparties.

    “We do not know for all of 2016 if [the merger]is on or off, and then PDEx would go ahead with their [IT] upgrade and we upgrade our system too, then come 2017, two questions can now happen, we are given the license to integrate, is it even attractive to us to do that? Because we, both companies, have spent money and the economics have now changed, right? They are costlier in terms of operations and a higher bill. The question is, do you still want to buy and [merge]operations like that? I do not know,” he said.

    When asked whether there is a chance that the planned merger may no longer materialize due to the delay in the approval by the SEC, Sicat said, “That is possible, these are practical questions. One of the things I think the regulators missed is the fact that whenever there is a commercial deal, there is a timing issue and we do not invent these deadlines, these are mutually agreed upon with counterparties.”

    Since 2014, the PSE has been working on the P2.25 billion acquisition for a majority ownership of PDS Holdings Inc. which, in turn, owns the Philippine Dealing and Exchange Corp., the trading platform for the country’s bond market.

    However, the PSE failed to secure the regulator’s approval last year as the agency still had several questions left unanswered as to how the equities market operator would run the merged entity.

    The SEC has until March to decide on whether it would finally give the green light to the proposed acquisition. In the said merger, PSE will be the surviving entity.

    Sicat, however, assured that the PDEx employees will not be losing their jobs.

    “PDEX, it is pretty clear, the fixed income platform, we want to retain them. This is where I am a little bit perplexed with the position of the SEC. PDEx employees know their job and what they are doing … The PDEx employees know their business, we know our business,” he said.


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