PSE Expects April ETF Offering

20 March 2013

The Philippine Stock Exchange expects the first exchange-traded fund (ETF) will be offered to local investors by April after its rules on the listing of ETFs has been approved by the Securities and Exchange Commission.

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

It is composed of underlying assets representative of the index it tracks, but, unlike a mutual fund, is traded on a stock exchange real-time during trading hours similar to stocks.

"The good new is that the SEC approved the final version of the rules on ETFs that actually allows us to start processing the various applications for listing," said PSE president Hans Sicat in a media briefing.

While there is not enough time for the PSE to have an ETF approved in the first quarter, "I think, very shortly, or sometime in April, we will have the first ETFs," said Sicat.

The PSE had initially targeted to start trading ETFs within the first quarter but the plan has been delayed since the rules were not yet ready. "Maybe we are just a few weeks behind schedule. But it will happen," Sicat stressed.

The PSE's ETF rules provide for transparency and investor safeguards and are adherent to the International Organization of Securities Commissions (IOSCO) principles for regulation of ETFs and best practices in other jurisdictions.

Sicat said ETFs will provide several advantages and investment options to investors including liquidity especially for those who cannot directly access specific sectors in the market due to a country's specific regulatory environment.

It will also contribute to the diversification of the investor's portfolio in a cost-efficient manner.

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

As part of continuing listing requirements, the ETF shall maintain a public ownership of at least 10 percent of its issued and outstanding shares. (JAL)