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SEC Short Selling Rules May Adopt Asian Market Practices

Date:

  • The Philippines’ SEC is aligning short selling in the PSE with best practices from major Asian markets.
  • SEC has been preparing for short selling since 2018, now focusing on proper guideline implementation and routine reporting requirements.
  • SEC Chairperson Emilio B. Aquino stresses balance between regulation and innovation, initially limiting short selling to top 30 listed companies on PSE.

The Securities and Exchange Commission (SEC) said it is taking steps to align short selling – set to be introduced to the Philippine Stock Exchange (PSE) – with best practices from major Asian markets.

SEC Eyes Asian Best Practices for Short Selling

Specifically, the Commission said it is studying existing practices in Southeast Asia, where short selling is allowed in Malaysia, Indonesia, Singapore, and Thailand. 

“We are pushing to align the short selling environment with the major Asian markets, which has the potential to promote liquidity, stabilize the market, protect investors, and further unlock the value of shares of Philippine corporations.” 

Emilio B. Aquino, Chairperson, SEC

SEC Short Selling Rules in the Philippines - SEC Emilio Aquino
Emilio B. Aquino, Chairperson, SEC

What is Short Selling?

Short selling involves betting on a stock price’s decline for profit. The investor sells a security they don’t own, made possible through the lending of the said security. The investor is then obligated to return the borrowed security or its equivalent at a future date.

The SEC has been laying the groundwork for this trading activity since 2018 when it ratified the PSE Guidelines on Short Selling Transactions. In the media release, the Commission said it has since been working with the PSE as well as market participants to make sure the guidelines are implemented properly before short selling is introduced to retail investors.

Among the matters the SEC is studying is requiring the submission of routine reports regarding all short selling and securities borrowing and lending (SBL) activities. This, the SEC said, will guide the Commission on future policy-making efforts.

SEC Short Selling Rules in the Philippines: A Balanced Approach

Aquino also reaffirmed ensuring that there is a balance between regulation and innovation:

“We will balance our role as regulator and market innovator, imposing the necessary restrictions and safeguards while ensuring that they will not stifle investors and trading participants from fully taking advantage of this trading strategy.”

Emilio B. Aquino, Chairperson, SEC

Initially, the PSE guidelines only permitted the stocks of the top 30 listed companies (and only 10% of the company’s outstanding shares) in the PSE to be available for short selling. The idea is this prevents significant drops while discouraging market manipulation.

Additional rules were approved, such as requiring the trading participants to confirm the borrowing arrangements first before initiating a short sale.

The topic of short selling in the stock market has been floated numerous times. Most recently, Ramon Monzon, Chief Executive of the PSE, advocated its launch to increase liquidity and attract foreign investments in the local market.

This article is published on BitPinas: SEC: Short Selling Rules in the Philippines May Adopt Asian Market Practices

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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