The Philippine Stock Exchange (PSE) is planning to launch two new product offerings in the next two years, the Global Philippine Depository Receipts (GPDRs) and derivatives such as index futures.
PSE President Ramon S. Monzon said GPDRs are peso-denominated instruments that represent an economic interest, but not voting rights, in an underlying security listed in an overseas exchange.
“Holders of GPDRs will have the option to convert them into equivalent shares or units of the underlying security. This innovation will allow local investors to diversify their portfolios by trading foreign securities within the domestic market,” he added.
Philippine listed companies, on the other hand, will likewise be traded in other exchanges, which in turn should generate additional liquidity for the local market. The GPDRs are targeted to be implemented by the first quarter of 2025.
Monzon said the PSE is also set to introduce index futures with the PSE index as the underlying asset.
The PSE is currently conducting learning sessions with other stock exchanges and other foreign market participants such as the Hong Kong and Taiwan Stock Exchanges, Citibank, HSBC, International Swaps and Derivatives Association, KGI and Maven to develop and introduce derivatives in the Philippine stock market.
“The introduction of derivatives is expected to enhance market transparency and liquidity by providing market-based pricing information,” he said.
Monzon also said that “we are targeting to launch our derivative products by the first quarter of 2026 as we have to work on the regulatory frameworks at both the SEC (Securities and Exchange Commission) and the BIR (Bureau of Internal Revenue).”
Under the PSE’s draft rules, a GPDR will be freely tradeable in the PSE on a sponsored or unsponsored basis.
For sponsored GPDRs, a foreign company which issued securities in an overseas exchange (the underlying company or sponsor) enters into an agreement with a Philippine-based GPDR Issuer to sell GPDRs representing such securities in the PSE.
For unsponsored GPDRs, GPDRs are issued by a Philippine-based GPDR issuer which acts as an intermediary but does not have a formal agreement with the underlying company in the overseas market.
Each GPDR, whether sponsored or unsponsored, represents a security listed on an overseas exchange and deposited with a custodian appointed by the GPDR Issuer in the relevant home market.
The underlying securities are registered in the name of the custodian and held on behalf of the GPDR Issuer who, in turn, holds the beneficial interest in the underlying securities.
Eligible to be GPDR issuers include trading participants of the PSE, banks authorized by the Bangko Sentral ng Pilipinas (BSP) to issue GPDRs, non-bank financial institutions authorized by the BSP to issue GPDRs, and investment companies under the Investment Company Act.
Any of these firms may be issuers by itself or through a corporate vehicle authorized solely to issue GPDRs, provided they have a three-year operating history in their respective lines of businesses at the time of their application as a GPDR issuer.
Any of these firms may set up a majority-owned corporate vehicle authorized solely to issue GPDRs and such corporation may invoke the operating history of its majority shareholder.
Applicants must have a minimum paid-up capital and stockholders’ equity of at least P100 million while GPDRs must have at least 50 holders upon application for listing and a minimum subscription of P30 million at the time of listing.