The Securities and Exchange Commission (SEC) is looking at best practices of short-selling in other countries as part of efforts to bolster trading in the local stock market.
In Asia, short selling is allowed in Singapore, Hong Kong, Malaysia, Thailand and Indonesia, among others, the SEC said.
The SEC is also considering requiring the submission of a regular report on all short selling and securities borrowing and lending (SBL) activities and their compliance with current rules and policies, to better guide the SEC on policies on short selling, moving forward.
SEC chairperson Emilio Aquino said short-selling could help boost liquidity in the market.
'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,' Aquino said.
'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,' he said.
Short selling is the practice of betting on the decline of a stock's price in order to make a profit. Here, an investor sells a security that he does not own, consummated by the delivery of a borrowed security, with a commitment to return the borrowed security or its equivalent on a determined or determinable future date.
The SEC has already approved guidelines that will facilitate the conduct of short selling in the local market.
In 2018, the SEC also cleared the PSE Guidelines on Short Selling Transactions, which provided that only the top 30 listed Philippine companies comprising the PSE Index, as well as exchange-traded funds, shall be eligible for short selling.
Companies must also maintain a ratio of short interest to outstanding shares of at least 10 percent.
This was followed by the approval of the Capital Markets Integrity Corp. (CMIC) Implementing Guidelines on SBL and Short Selling in 2019.
According to the PSE, the guidelines govern the recording of SBL and short selling transactions on trading participants' books and records. They also ensure that trading participants shall ascertain that parties have entered into the necessary borrowing arrangements prior to entering a short sale transaction.
The market is now waiting for the SEC and PSE to finally allow short-selling in the country.
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