PSE eyes Q1 2025 for GPDR launch, derivatives by 2026

The Philippine Stock Exchange (PSE) plans to launch its global Philippine depositary receipts (GPDRs) and derivatives offerings within the next two years to enhance liquidity and improve the local stock market, its president said.

“In terms of expanding our product offerings, the PSE will offer two new products in the next two years, the GPDRs and derivatives; the GPDRs are targeted to be implemented by the first quarter (Q1) of 2025,” PSE President and Chief Executive Officer Ramon S. Monzon said during a forum organized by the UK MOBILIST Programme and the PSE in Taguig City on Wednesday.

“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 Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR),” he added.

GPDRs refer to peso-denominated instruments that represent an economic interest, but not voting rights, in an underlying security listed in an overseas exchange.

The holder has the option to convert the GPDR to the equivalent shares or units of the underlying security, subject to requirements by the issuer.

“This innovation will allow local investors to diversify their portfolios by trading foreign securities within the domestic market,” Mr. Monzon said.

“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,” he added.

On the introduction of derivatives, Mr. Monzon said the PSE is conducting learning sessions with other stock exchanges and foreign market participants such as the Hong Kong and Taiwan Stock Exchanges, Citibank, and HSBC.

The derivatives market comprises derivatives or instruments whose values are derived from other underlying assets. Derivatives include options and futures contracts.

“The introduction of derivatives is expected to enhance market transparency and liquidity by providing market-based pricing information,” Mr. Monzon said.

“PSE index futures with the PSE index as the underlying asset will be the first derivatives product to be traded,” he added.

The PSE previously sought public comment on its proposed GPDR rules, which provide that the securities must be listed, traded, and in good standing in a World Federation of Exchanges-member exchange.

The rules also stated that GPDRs may be issued by PSE trading participants, banks, and nonbank financial institutions authorized by the Bangko Sentral ng Pilipinas, and investment companies under Republic Act No. 2629 or the Investment Company Act.

In September, the SEC said it was looking at the establishment of a derivatives market to improve the domestic capital market and provide more options for investors.

“Developments in the derivatives market as a whole have contributed to more complete financial markets, improved market liquidity, and increased the capacity of the financial system to price and bear risk effectively– ultimately, ushering in stronger economic growth over time,” SEC Commissioner McJill Bryant T. Fernandez said. — Revin Mikhael D. Ochave