SEC rejects stock, bond markets merger

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The Securities and Exchange Commission (SEC) on Monday thumbed down the proposed merger between the Philippine Stock Exchange Inc. and bond market operator PDS Holdings Inc., ruling that the intended move could negatively impact the latter’s ability to effectively operate in the interest of the investing public.

In SEC Resolution 230, the corporate regulator’s executive committee resolved to deny the request for exemptive relief by the PSE in relation to its proposed acquisition of Philippine Dealing Systems Holding Corp (PDS).

The decision read, “We resolve to deny, considering PSE’s failure to present clear and convincing evidence that: It is entitled to an exemption from the policy behind Section 33.2 paragraph C of the Securities Regulation Code [SRC]; and its proposed acquisition of PDS will not negatively impact on PDS’ ability to effectively operate in the public interest.”

The SEC is referring to the provision in the SRC that in part stipulates that, where the Exchange is organized as a stock corporation, no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent (20 percent) of the voting rights of the Exchange.


The same provision, however, provides that the SEC may adopt rules and regulations or issue an order, upon application, exempting an applicant from the 20 percent ownership limitation if the SEC determines that such ownership or control will not negatively impact on the exchange’s ability to effectively operate in the public interest.

The PSE sought exemption from the SEC in order to acquire the majority stake of PDS, which operates the country’s bond market platform through the Philippine Dealing & Exchange Corp (PDEx).

“Our decision [to deny]is unanimous,” Associate Commissioner Ephyro Luis Amatong told reporters after the executive committee meeting on Monday, which was attended by the agency’s chairperson and four commissioners.

The SEC, however, said that the denial for exemption “is without prejudice to any subsequent application by the PSE for similar relief in the future.”

Amatong explained that the SEC would hold a press briefing on Tuesday to explain in detail how the executive committee arrived at its decision to bar the PSE from acquiring PDS.

Amatong had earlier said that the main issue the Commission needed answered in formulating a decision was “Are the Philippine capital markets better off with the two exchanges integrated or are they better off apart?”

Amatong emphasized that non-negotiable guideline for the decision was anchored on whether to do so would result in better services, both to the investors and issuers of bonds and equities.

“There are advantages—lower cost, making the exchanges more efficient. If you combine them, would they be able to provide better services, if not, why would we combine them? What’s in it for us anyway?” the commissioner added.

Since 2014, the PSE has been working on a P2.25-billion acquisition of a majority stake in PDS Holdings. The stock exchange failed to secure regulatory approval last year as the SEC wanted to resolve several questions, in particular how the PSE would run the merged entity.

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