The Philippine Stock Exchange (PSE) is executing its biggest overhaul of index rules in more than a decade, cutting the public float requirement for giant companies and tightening liquidity tests to make its benchmarks more reflective of market activity.

The exchange said it is revising its PSE Index Series management policy to align with global standards and remain responsive to evolving market needs.

Among the most significant amendments is the reduction of the minimum free float requirement from 20 percent to 15 percent for companies with a market capitalization of at least ₱250 billion, provided all other inclusion criteria are met. This change aligns with the Securities and Exchange Commission’s (SEC) shift from a flat 20 percent minimum public ownership requirement for initial public offerings (IPOs) to a tiered structure based on market cap.

The revised float threshold clears a major hurdle for Mynt (GCash) to join the benchmark PSEi. Mynt’s upcoming IPO is expected to float only 15 percent of its outstanding capital, which would have rendered it ineligible under the old 20 percent rule.

However, COL Financial Chief Equity Strategist April Lynn Tan noted another potential barrier: the rule requiring a company to be listed for at least six months prior to index inclusion.

With Mynt targeting an October listing, it would ordinarily miss the upcoming index evaluation in December and implementation in February. That said, Tan noted that the PSE has the discretion to waive the six-month rule.

Another key reform introduces a 98 percent cumulative market capitalization threshold as an additional criterion for index inclusion.

Current policy sets no minimum market capitalization requirement, except for the MidCap Index, which requires a company’s cumulative full market cap to fall within the top 95 percent.

The PSE is also replacing its existing liquidity test with two new measures: the Median Trading Activity Ratio (MTAR) and Monthly Average Daily Value Turnover (MADV). The previous criterion relied solely on Median Daily Trading Value, requiring stocks to rank in the top 25 percent to 50 percent across nine out of 12 months.

Under the new framework, MTAR incorporates free-float market capitalization to measure liquidity relative to a stock’s actual investable portion.

MADV complements this by establishing an absolute liquidity threshold, ensuring only the most actively traded shares by value are admitted. The MTAR is calculated by multiplying a company's monthly median traded value by its active trading days, then dividing by its month-end free-float market capitalization.

The PSE introduced these measures to ensure index constituents remain genuinely liquid and tradable. Under previous rules, a company with a high public float could still secure an index spot even if few shares were actively traded on the bourse—as seen with the PSE’s own stock, where a ~48% public float yields little actual sell-side trading.

To give market participants sufficient time to digest the changes, these amendments will officially take effect during the February 2027 index rebalancing.