A stock exchange is an organized marketplace or facility that brings buyers and sellers together and facilitates the sale and purchase of stocks.
The only stock exchange operating in the country is the Philippine Stock Exchange, Inc. (PSE). It makes sure that trading transactions are done in an efficient, orderly, fair, and transparent manner. It enforces rules and regulations that its publicly listed companies and trading participants must strictly abide by. In this way, the PSE fulfills its function as the “guardian” of the Philippine stock market.
Investors, also referred to as stockholders or shareholders, are those who own shares of stock of a publicly listed company. They are accorded certain privileges like the right to fair and equal treatment, the right to vote, and the right to receive dividends, among others. They are classified as either retail or institutional, and local or foreign.
A stockbroker or trading participant is licensed by the Securities and Exchange Commission (SEC) and is entitled to trade at the Exchange. They act as an agent between a buyer and seller of stocks in the market. For their services as stockbrokers, they receive from their clients either a buying or a selling commission.
As of January 2021, the PSE has 126 active stockbrokerage houses.
The representatives (licensed salesmen) of these accredited stockbrokers convene daily, at certain specified hours, on the trading floor of the exchange, where they sell and buy shares of stocks for the account of their clients. They execute orders in the market to the greatest possible advantage of their customers, by buying at the lowest possible price or by selling at the highest possible price.
There are two (2) types of stockbrokers:
- Traditional – those who assign a licensed salesman to handle your account and to take your orders via phone call, SMS or messaging apps
- Online – those whose main interface is an online trading platform where clients execute their orders and access market information
Listed companies, also called “issuers”, are those whose shares of stock are traded on the Exchange. These companies qualified with the stringent listing and reportorial requirements of the PSE, and have gone through initial public offering (IPO) or listing by way of introduction.
As of end of 2020, the PSE there are 272 listed companies in the PSE. These are classified into six different sectors: Financials, Industrial, Holding Firms, Property, Services, and Mining and Oil.
The Securities Clearing Corporation of the Philippines (SCCP) is a wholly owned subsidiary of the Exchange. It was established to ensure the orderly settlement of equity trades executed at the PSE. The SCCP uses the Central Clearing and Central Settlement (CCCS) system purchased from the Capital Markets Co. (CAPCO) of Belgium.
SCCP is responsible for establishing the cash and securities liabilities and entitlements of its clearing members; synchronizing the settlement of funds and the transfer of securities based on the delivery-versus-payment model or multilateral net settlement; guaranteeing the settlement of trades in the event of a trading participant’s trade default in order to ensure the finality and irrevocability of all Exchange trades through its fails management procedures; and implementing appropriate risk management measures in order to mitigate risks inherent in the clearing and settlement of Exchange trades and the maintenance and administration of the Clearing and Trade Guarantee Fund (CTGF).
Know more about SCCP by visiting https://www.sccp.com.ph/main/home.html
The Philippine Depository and Trust Corp. (PDTC) acts as the securities depository or “custodian” of listed shares of stock that are traded at the PSE. It was organized to establish a central depository in the Philippines and to implement scripless trading.
The PDTC performs book-entry transfer of securities:
- from seller’s to buyer’s accounts during settlement of Exchange trades;
- from one PDTC participant to another per client instruction; and
- from lender’s to borrower’s account for loan transactions.
The PSE has three (3) accredited banking institutions where trading participants make and receive payments for stock transactions.
The settlement banks accept deposits of funds for payment of securities bought, confirm payments of due clearing obligations to SCCP, debit buyer’s cash account and credit seller’s cash account during settlement, and receive and/or return cash collateral put up by clearing members to cover their daily trade negative exposures.
The stock transfer agent is considered the “official keeper” of the corporate shareholder records. The stock transfer agents provide the issuer or the listed company with a list of holders of its securities. They effect transfer of beneficial ownership and process corporate actions like stock or cash dividends, stock rights, stock splits, and collation of proxy forms.