A Single Rulebook for a Fragmented Market
For years, market making in the Philippine Stock Exchange existed in narrow silos. Rules applied almost exclusively to exchange-traded funds, leaving the broader equities market without a consistent mechanism for continuous two-way quotations. On June 4, 2026, the PSE published a draft general framework that changes that architecture, creating one overarching set of standards for all market-making operations while allowing product-specific addenda where needed.
PSE President and CEO Ramon S. Monzon framed the shift in operational terms: a main framework reduces the friction of designing rules separately for each instrument, whether the target is a depositary receipt or an ordinary share. The draft simultaneously introduces a product-level framework for Global Philippine Depository Receipts, extending beyond the exchange’s existing ETF-only rules.
Accreditation as the Gatekeeper
The proposed framework does not open market making to any willing broker. Applicants must be registered broker-dealers with the Securities and Exchange Commission and active trading participants of the PSE, carrying at least ₱100 million in unimpaired paid-up capital and a three-year continuous operating record. Firms that cannot meet the track-record test may qualify through key personnel with at least five years of securities trading experience on a local or World Federation of Exchanges–member bourse.
Beyond eligibility, the draft imposes operating obligations: maximum bid-ask spreads, minimum quote sizes, and required presence times during trading sessions. These are not decorative standards. They translate liquidity provision into measurable commitments that the exchange can monitor and enforce.
Incentives Replace Voluntary Goodwill
The earlier regime relied heavily on the voluntary participation of brokers. The 2026 draft introduces a formal incentive layer, including exchange and clearing fee concessions, price-quoting services, and connectivity support, subject to commercial agreements. In effect, the PSE is treating liquidity provision as a compensable service rather than an expected byproduct of trading activity.
Market participants have until June 23, 2026, to submit comments before the final amendments go to the SEC for approval. The timeline matters because the framework is designed to be expandable: once the general architecture is in place, the exchange can layer in rules for individual stocks and other exchange-traded products without rebuilding the legal scaffolding.
What the Reform Signals
The Philippine market has long been characterized by concentrated turnover and wide spreads in second-tier names. A unified market-making framework does not automatically solve that structural problem, but it changes the default. Liquidity provision becomes an accredited function with defined obligations and defined rewards, rather than an informal courtesy extended by a handful of brokers. The SEC’s parallel work on market-making rules, exposed for comment in June 2026, reinforces the direction: the Philippines is moving toward a formal market-microstructure layer that global institutional investors expect to see before allocating capital at scale.
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