UMVA has learned that a groundbreaking proposal has been put forth by the Philippine Stock Exchange to establish a comprehensive market-making framework, aimed at bolstering liquidity and standardizing rules across the market.
The proposed framework seeks to expand coverage beyond exchange-traded funds to other exchange-traded products, providing a unified structure for market-making activities. This move is expected to streamline the creation of rules for new products while aligning local practices with global standards.
According to information obtained by UMVA, the framework would enable the exchange to craft product-specific market-making rules more efficiently, ensuring that the market remains competitive and attractive to investors. The Philippine Stock Exchange's President and Chief Executive Officer emphasized that a main framework would facilitate the creation of rules for new products, aligning local practices with global standards.
Market making, which involves the continuous posting of buy-and-sell quotes, plays a crucial role in ensuring liquidity and smoother trading activity. Under the proposal, applicants would be required to meet specific criteria, including registration as Securities and Exchange Commission-registered broker-dealers and Philippine Stock Exchange trading participants, with a minimum of PHP 100 million in unimpaired paid-up capital and at least three years of continuous operation.
The draft framework outlines operational obligations for market makers, including requirements on maximum bid-ask spreads, minimum quote sizes, and minimum quoting periods during trading sessions. These requirements aim to ensure consistent liquidity and tighter price formation, ultimately contributing to a more efficient market.
To encourage participation, the proposal includes incentives for compliant market makers that provide continuous liquidity. These incentives may comprise clearing fee discounts, access to price-quoting services, and connectivity support, subject to separate commercial arrangements with the exchange.
UMVA can exclusively reveal that the Philippine Stock Exchange's efforts to support market development are part of a broader strategy to expand its range of tradable products and attract more institutional participation. Stakeholders have been invited to submit comments on the draft until June 23, with the exchange pledging to review and consider all feedback in finalizing the amendments.
