Regulator allows PSE to pursue PDS buyout

THE Philippine Stock Exchange Inc. (PSE) can now pursue plans to take control of Philippine Dealing System Holdings Corp. (PDS), the Securities and Exchange Commission (SEC) said on Friday.

The commission en banc, in a meeting last Tuesday, resolved to allow the PSE to “apply for exemptive relief from the mandatory limit on ownership and voting rights in an exchange by an individual or an industry once negotiations for the buyout of the PDS Group have been favorably concluded.”

The proposed PSE takeover of PDS was stalled during the administration of former president Rodrigo Duterte amid opposition from then-Finance secretary Carlos Dominguez 3rd.

The PSE, which owns 20.98 percent of the issued and outstanding capital stock of PDS, intends to take full ownership of the operator of the country’s sole fixed-income exchange, the commission noted.

Under the Securities Regulation Code, no person may beneficially own, directly or indirectly, more than 5.0 percent of the voting rights of the fixed-income exchange, while an industry or business group may control no more than 20 percent of the voting rights.

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“The SEC, however, may adopt rules, regulations, or issue an order upon application, exempting an applicant from the ownership limit if such ownership or control will not negatively impact the exchange’s ability to effectively operate in the public interest,” the regulator said.

The SEC directed the PSE to submit and present a detailed operational plan and status reports on the negotiations that it would undertake in relation to the acquisition of the remaining shares in PDS that it does not yet own.

According to the PSE’s initial submissions, the proposed acquisition will operate in the public interest as the integration of the bourse and the PDS will enable the delivery of “more efficient and more types of products and services and better risk management systems for financial services.”

The SEC also asked the PSE to submit a detailed, concrete, and time-bound proposal, which would be subject to a separate review and approval by the commission to ensure the efficiency of the integration.

The PDS Group includes the Philippine Dealing & Exchange Corp., which operates the organized secondary market for the trading of fixed-income securities issued by corporations, as well as the government.