SEC approves ETF rules

MANILA, Philippines – The Securities and Exchange Commission (SEC) on Monday, March 18, approved the proposed rules on exchange-traded funds (ETFs).

With the SEC’s approval, the Philippine Stock Exchange (PSE) can finally roll out ETFs in the country by April 2013.

“We approved the PSE ETF rules today except for (a) portion dealing with the market maker, which requires further study and discussion,” SEC commissioner Juanita Cueto said in a text message to reporters.

An ETF is an investment fund that is similar to a mutual fund. It tracks the main exchnage index or other market indices and replicate their performance.  

It is composed of underlying assets, but unlike a mutual fund, it is traded on a stock exchange real-time during trading hours.

Several financial institutions, including First Metro Investments Corp., Bank of the Philippine Islands and BDO Unibank Inc. have expressed interest in creating their respective ETFs.

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 shares becomes effective and its listing application is approved by the PSE.

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.

As part of continuing listing requirements, the ETF must:

• Maintain a public ownership of at least 10% of its issued and outstanding shares,
• Have an Investor Relations Office to manage its investor relations program, and
• Have a fund manager that has been in operation for at least two years.

PSE president and chief executive officer Hans Sicat earlier said ETFs would provide investors advantages and investment options, including liquidity, especially for those who cannot directly access specific sectors in the market because of the regulatory environment. – Rappler.com