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Update: PSE Eyes Launching Short Selling On November 6

Photo for the Article - Update: PSE Eyes Launching Short Selling On November 6

Update: Original article says October 26. However, the PSE announced that they will delay it to November 6, 2023.

  • The Philippine Stock Exchange (PSE) is set to launch short selling after obtaining government regulators’ approval for its transaction guidelines, specifically those related to securities borrowing and lending (SBL).
  • The Securities and Exchange Commission (SEC) approved the use of offshore collateral for securities lending in May, and the Bureau of Internal Revenue (BIR) accepted the filing and registration of the Global Master Securities Lending Agreement (GMSLA) last month, key steps in facilitating short selling.
  • The PSE has updated its short selling guidelines to include eligible securities from the PSE MidCap and PSE Dividend Yield indices, expanding the range of securities available for short selling beyond the PSE index and exchange-traded funds (ETFs).

The Philippine Stock Exchange (PSE) is poised to launch short selling on November 6 after securing the approval of government regulators for its guidelines on its transactions.

Guidelines Receives Green Light

The PSE announced in a statement that the Guidelines for Short Selling Transactions had taken effect immediately after regulators had given their approval for the “critical components of securities borrowing and lending (SBL).” 

The exchange explained that “short selling can only function if an SBL program is in place.”

According to the exchange, the Securities and Exchange Commission (SEC) had approved the use of offshore collateral for securities lending in May. The Bureau of Internal Revenue (BIR) accepted the filing and registration of the Global Master Securities Lending Agreement (GMSLA) last month.

“We are grateful to the SEC and BIR for their approvals on important regulatory aspects of SBL and short selling.”

Ramon S. Monzon, President and CEO, PSE
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Monzon emphasized that this development brings the exchange one step closer to the full adoption and implementation of its programs.

The PSE also announced that it has updated the eligible securities in its short selling guidelines to include members of the PSE MidCap and PSE Dividend Yield indices. Prior to this update, only securities comprising the PSE index and exchange traded funds (ETFs) were considered eligible securities for short selling.

What is Short Selling?

Short selling is a strategy where an investor profits by speculating on a stock’s price decline. This is done by selling a security they don’t own, which is made possible through borrowing that security. The investor must later return the borrowed security or its equivalent at a later date. In essence, it involves borrowing and selling shares with the expectation of buying them back at a lower price in the future to make a profit.

SInce 2018, the SEC has been preparing for short selling in the Philippines when it approved the PSE Guidelines on Short Selling Transactions. It collaborated with the PSE and market participants to ensure the proper implementation of these guidelines before making short selling available to retail investors.

In June, PSE reintroduced short selling a year after it closed its trading floor, initially limiting it to the 30 largest stocks in the PSE index. To address concerns of misuse, short selling was capped at 10% of a listed company’s outstanding shares and was only allowed when a stock’s price was rising. 

Last month, the SEC announced that it will be aligning short selling in the PSE with best practices from major Asian markets. The Commission believes that these strategies may potentially promote liquidity, stabilize the market, protect investors, and further unlock the value of shares of Philippine corporations.

This article is published on BitPinas: PSE Eyes Launching Short Selling On October 23

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