Is PSE-PDS merger beneficial to both markets?

SEC seeks to issue ruling before March 26


The Securities and Exchange Commission (SEC) is now in the process of determining whether the proposed merger and acquisition deal between the Philippine Stock Exchange Inc. and the Philippine Dealing and Exchange Corp. would actually benefit the market.

On the sidelines of 11th PDS Awards Night late Thursday, SEC Commissioner Ephyro Luis Amatong told reporters that a decision on the matter is expected to come out before the March 26 deadline.

“If you look at your calendar, it states there that March 26 is a black Saturday, meaning, we still have the Monday after the Easter Sunday to decide. But of course, we want everybody to enjoy their holiday break so we want to issue our decision before the scheduled deadline,” Amatong said.

The primary question by SEC Chairperson Teresita Herbosa is the wide-ranging benefit of merger between the equities and fixed-yield markets, Amatong noted.

“Are the Philippine capital markets better off with the two exchanges integrated or are they better off apart?” Amatong emphasized, saying the commission as a whole shares this concern.

“To answer this question, we have to run scenarios. Among the things that are being considered is which is more favorable to capital market development?” he said.

Asked to comment on PSE President and chief executive officer Hans Sicat’s earlier remark that “delays in securing regulatory approval for the proposed merger between the PSE and PDS Holdings Inc. would translate into a missed opportunity amid the Asean economic integration,” Amatong emphasized his view on the matter.

“I don’t think having two separate exchanges is an impediment to wooing investors. The integration is just perceived to make it easier for everyone. Thus, no one is saying that I cannot invest in the Philippines because the exchanges are separate,” he said.
PDS Holdings operates the trading platform of the bond market.

“So if you are a foreign investor do you care if [… the Philippines] has separate exchanges, I don’t think so,” Amatong noted.

He expounded on the more important questions that need to be answered before the SEC arrives at its decision.

“Would the merger result in savings, since the cost of trading is expected to be lower, and would it translate into savings? Where would the savings go, to the issuer or to the merged entity? Will it go to the greater profitability of the owners of the combined exchanges? That is one of the questions,” he said.

The non-negotiable issue is if the merger result in better services both to the investors and issuers of bonds and equities, Amatong emphasized.

“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 to own a majority of PDS Holdings which owns the Philippine Dealing and Exchange Corp.

The PSE failed to secure regulatory approval last year as the SEC wanted to resolve several questions, particularly how the PSE would run the merged entity. The PSE submitted its proposed business plan to the SEC on January 26.

Once it has received the PSE’s replies to its queries, the SEC has 60 days to decide if it would give the merger and acquisition the much coveted green light. The PSE will be the surviving entity under the proposed merger.


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