Traders take calls at the Philippine Stock Exchange trading floor. —ELOISA A. LOPEZ
After an aborted union last year, the Philippine Stock Exchange (PSE) and Philippine Dealing System Holdings Corp. (PDS Group) have rekindled their engagement, the primary goal of which is to unify the country’s capital markets for better efficiency. But beyond the unification, this deal has also given Philippine banks a chance to rethink the current government securities (GS) trading platform, possibly finding a way out of a system long loathed by most bank treasurers.
Compared to the last attempt to merge PSE and PDS under a lock-stock-and-barrel acquisition framework, this time, the strategy is different because the GS trading business of fixed income trading platform Philippine Dealing and Exchange Corp. (PDEx) will be carved out of the transaction.
This is why the new deal with the Bankers Association of the Philippines (BAP)—the single-biggest controlling shareholder in PDS—valued the PSE’s rekindled takeover bid at P2 billion for 100 percent. This is slightly lower than the P2.25-billion valuation in 2015 to price in the potential exclusion of the GS over-the-counter business under PDEx.
PDS is the holding firm for PDEx, Philippine Depositary and Trust Corp. (PDTC) and Philippine Securities Settlement Corp.
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To recall, a group led by former congressman Luis Villafuerte challenged PDEx’s operation of the country’s sole fixed-income platform under PDEx in 2013, accusing financial regulators of extending “special favors, undue advantages and unwarranted benefits” to create a “monopoly” in the government securities market. The case is still pending in the Supreme Court but back-channel discussions have apparently persuaded Villafuerte to possibly drop the case in exchange for the GS business being carved out of the deal.
The PSE, for its part, will instead work on creating a real exchange for corporate bonds under PDEx.
