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abs-cbnNEWS.com (7/19/2007 6:03:56 PM)
PSE approves revised rules on short-selling
By JUDITH BALEA
The Philippine Stock Exchange (PSE) announced Thursday that its board has approved and submitted a revised set of short-selling rules to add sophistication to the local market and attract more investments.
The PSE has submitted the set of short-selling rules to the Securities and Exchange Commission for final approval.
"With the short-selling rules in place, investors may make money, or they can protect their investments, even when our market is retreating," PSE president Francis Lim said.
Short selling refers to the sale of any security that the seller does not own, or to a sale that will be settled by the delivery of borrowed securities.
A short sale happens when a person sells at a higher price a stock that he does not own and later buys from another at a lower price the same stock for delivery to the buyer who earlier bought at a higher price. The difference between the higher selling price and the lower buying price represents the profit of the short-seller.
"This is the essence of short-selling, which appeals to investors who love to hedge their positions in the stock market. But we have to put in place the short-selling rules for the smooth conduct of these transactions," Lim said.
Once approved by the SEC, the rules will complement the earlier set of rules governing the PSE's Securities Borrowing and Lending (SBL) program. The SBL rules, which are related to short selling, are now in effect.
"The short selling rules, together with the securities lending program, will definitely increase the value turnover of our equities market," said Lim.
The PSE's proposed short-selling rules will govern short-selling transactions that involve PSE trading participants, whether the transactions are for the account of the trading participants or for their clients.
Under the proposed rules, no director, officer or principal stockholder of a listed corporation shall make a short sale in securities of the listed corporation in which he or she is a director, officer or principal stockholder.
The proposed rules authorize the PSE, upon due notice to the SEC, to restrict or prohibit short selling indefinitely or for such period of time as it may deem necessary or advisable for the protection of investors and for maintaining an orderly market.
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