[Market Rider] SEC Introduces Market Maker Framework to Enhance PH Stock Trading

The Securities and Exchange Commission (SEC) in the Philippines has announced a new framework for market makers, a move aimed at enhancing liquidity and price discovery in the local stock market. This initiative comes at a time when the Philippine Stock Exchange (PSE) seeks to attract more investors and trade volume.

Market Makers: A Solution for Liquidity Issues

Market makers are financial firms that facilitate trading by ensuring there are always buyers and sellers available. This framework, under SEC Memorandum Circular No. 28, Series of 2026, sets a minimum capital requirement of P150 million for firms looking to operate as market makers. The goal is to boost trading activity in an otherwise stagnant market.

We have many fundamentally sound Philippine companies trading at attractive valuations. What we lack is liquidity. Now is the time to unlock their value.

Jose Ma. Clemente 'Joey' Salceda, PLLO Secretary

• Minimum capital requirement set at P150 million
• Market makers required to submit quarterly performance reports
• Specialists with at least three years of experience must be designated

While the initiative has garnered support from key financial industry figures, including Salceda and Edward Lee, concerns linger regarding the profitability of market making in the Philippine context. Analysts like Joseph Roxas from Eagle Equities Inc. question how the profit model will hold up against operational costs and market dynamics.

Historical Context and Regulatory Challenges

Market making has been part of the Philippine financial landscape since the launch of the Exchange-Traded Fund (ETF) framework in 2013. However, the expanded scope under the new regulations marks a significant shift. This framework aims to address liquidity issues that have plagued the Philippine stock market for years.

The SEC's initiative is not without its critics. Some market veterans argue that the P150 million capital requirement may not be sufficient for firms looking to engage in this high-stakes environment. Joel de la Peña, market strategist at H.E. Bennett Securities, expressed skepticism, suggesting that larger financial backing is essential for effective market making.

Outlook and Future Implications

As the SEC moves forward with this framework, the expectation is that improved liquidity will attract more participants to the market. However, balancing regulatory complexities and ensuring adequate profitability for market makers will be critical for the success of this initiative.

Overall, the SEC's push for a market maker framework could represent a turning point for the Philippine stock market, potentially leading to a more dynamic trading environment and increased investor confidence.