PSE SEEKS SEC APPROVAL OF DRAFT RULES ON EXCHANGE-TRADED FUNDS
(The following press release from the Philippine Stock Exchange Inc. was received by e-mail. The sender verified the statement.)
29 January 2013 PSE seeks SEC nod for final draft of ETF Rules
The Philippine Stock Exchange (PSE) is seeking the approval of the Securities and Exchange Commission (SEC) on its proposed rules that will govern the listing and trading of Exchange Traded Funds (ETFs).
The proposed rules incorporated industry comments gathered as of January 18.
"We are thankful to industry practitioners who provided very helpful insights during the period of public comments. We are eagerly awaiting the SEC's guidance on this new asset class which, based on the comments we received, appears to be generating a lot of interest already from the public," PSE President and Chief Executive Officer Hans B. Sicat said.
An ETF is an investment fund that is similar to a mutual fund. It is composed of underlying assets representative of the index it tracks, but unlike a mutual fund, is traded on a stock exchange real-time during trading hours similar to stocks. An ETF usually tracks the main index or other market indices and replicate their performance.
The rules shall be governed by the ETF rules issued by the SEC in October last year. These PSE ETF rules come in three parts namely: the general provision, listing and disclosure, and market making rules and guidelines specific to ETFs. The proposed rules also provide for transparency and investor safeguards and are adherent to the International Organization of Securities Commissions (IOSCO) principles for regulation of ETFs and best practices in other jurisdictions.
Under the proposed PSE ETF rules, an ETF applying to list on the Exchange shall have a minimum paid-up capital of at least P250 million. The ETF company may undertake an offering of its ETF shares when the registration of such ETF shares becomes effective and its listing application is approved by the Exchange. Such offering will not be covered by the Exchange's IPO distribution rules under its listing rules. Likewise, the lock-up and track record requirements in the listing rules shall not apply.
The underlying securities comprising the index which the applicant ETF intends to track must be listed and traded in a registered exchange and should have sufficient liquidity. The ETF shall disclose the liquidity criteria in its Prospectus.
As part of continuing listing requirements, the ETF shall maintain a public ownership of at least 10 percent of its issued and outstanding shares. It must ensure that all necessary facilities and information are available to enable ETF shares holders to exercise their rights. The ETF must also have an Investor Relations Office to manage its investor relations program.
Also, the general structured and unstructured reportorial requirements shall apply to ETFs under the Disclosure Rules of the Exchange in addition to the reportorial requirements under the SEC ETF Rules.
ETF participants include the fund manager which should have been in operation for at least two years and have satisfactory experience in managing funds. An ETF shall appoint at least two authorized participants who are registered broker-dealers and active trading participants of the Exchange who shall have a minimum capital requirement of P100 million, among others.
At least one of the designated authorized participants of an ETF shall be designated as a market maker of the ETF. An ETF market maker is an authorized participant that assumes the obligation of providing two-way quotes for the purpose of ensuring liquidity and of maintaining a fair and orderly trading market to the ETF shares.
Mr. Sicat said ETFs will provide several advantages and investment options to investors including liquidity especially for those who cannot directly access specific sectors in the market due to a country's specific regulatory environment. It will also contribute to the diversification of the investor's portfolio in a cost-efficient manner.
Public and Investor Relations Department
Beth S. Lacson 688-7583 <mailto:email@example.com> firstname.lastname@example.org
Nina B. Zabella 688-7582 <mailto:email@example.com> firstname.lastname@example.org
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