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Manila Bulletin devider Business devider The Stock Market devider PSE starts VWAP trading on March 1

PSE starts VWAP trading on March 1

Published Feb 16, 2024 07:32 am

The Philippine Stock Exchange (PSE) announced that it will open Volume Weighted Average Price (VWAP) trading on March 1, 2024 after receiving the green light from the Securities and Exchange Commission (SEC).

A VWAP trade is a pre-arranged transaction executed at the volume weighted average price of a stock. It is executed by a trading participant for different clients or its proprietary account through the VWAP trading facility of the PSE.

Ramon S. Monzon.jpeg
PSE President and CEO Ramon S. Monzon

The VWAP helps compare the current price of the stock to a benchmark, making it easier for investors to decide when to enter and exit the market. Also, the VWAP can assist investors in determining their approach towards a stock (active or passive) and make the right trade at the right time.

In a statement, the PSE said it has also conducted a briefing on the VWAP for trading participants (TPs) and onboarded of authorized traders of TPs interested in this facility.

“The ability to easily place VWAP-based orders expands the options available to investors, especially those who prefer to use this approach in trading,” said PSE President and CEO Ramon S. Monzon.

He added that ”we expect foreign and institutional investors who prefer to look through price volatilities during the trading day and focus on the average price instead to avail of this facility.”

VWAP trading may only be done within a 15-minute window after the market’s run-off period, or from 3:00 to 3:15 p.m., using the price computed by the Exchange. VWAP trades may only be executed by authorized salesmen or traders of a trading participant.

The PSE said it studied the VWAP rules of other bourses and used them as basis for the Exchange’s own VWAP trading rules.

Under the PSE’s VWAP rules, the execution price will be computed by the PSE based on the volume-weighted average price for the stock in a five-trading day. The VWAP shall not exceed four decimal places and the value of the transaction must at least be P500,000 or higher.

All trades of a given stock will be included in the VWAP computation for a stock except for block sales, intentional cross, and odd lot transactions.

If there is a delay in the display of the VWAP of a stock, the PSE will suspend the closing VWAP session and immediately make an announcement to trading participants.

If the issue is resolved with at least five minutes remaining in the closing VWAP session, the PSE will resume the closing VWAP session. However, if the issue persists and there is less than five minutes remaining in the session, the PSE will cancel VWAP trading for the day.

Related Tags

Philippine Stock Exchange (PSE) Volume Weighted Average Price (VWAP)
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