THE Securities and Exchange Commission (SEC) has set a P150-million minimum capital requirement for firms seeking to act as market makers in stocks and bonds under a new regulatory framework aimed at improving liquidity and trading activity in the Philippine capital market.
In a statement over the weekend, the corporate regulator said trading participants must meet the capital requirement and obtain accreditation or recognition from the relevant exchange to qualify as market makers under SEC Memorandum Circular (MC) No. 28, Series of 2026, issued on Oct. 15.
Market makers are trading participants that provide buy and sell quotations for securities to facilitate transactions and maintain liquidity in the secondary market.
“The development of market making mechanisms is recognized globally as a means to enhance liquidity, improve price discovery, and support capital formation, and such mechanisms differ in operation between equity and fixed income markets by reason of their distinct market structures, trading conventions, and liquidity characteristics,” the SEC said in the circular.
Under the rules, applicants must demonstrate adequate operational capacity and a satisfactory track record.
Each firm must also designate at least one specialist with a minimum of three years of relevant experience in securities trading or market making, or equivalent qualifications based on certifications, training, and demonstrated proficiency.
For equities, market makers must maintain firm buy and sell quotations for a minimum period set by the exchange and comply with applicable market participation requirements.
The quotations must generally be executable, except during system failures, market-wide disruptions, or other circumstances permitted under exchange rules, according to the circular.
For fixed-income securities, exchanges will determine quotation requirements based on the characteristics and liquidity of each security, trading mechanisms, and prevailing market conditions.
Exchanges will also determine whether quotations must be firm, indicative, or provided on a best-efforts basis, as well as the minimum period for maintaining them.
SEC Chairperson Francisco Ed. Lim said the framework is intended to encourage trading activity in the domestic capital market.
“We expect this framework to help reduce frictions in secondary-market trading, support more efficient price discovery, and foster a more competitive trading environment for both domestic and international investors,” Mr. Lim said.
Finance Secretary Frederick D. Go said a more liquid capital market could facilitate investor participation and help businesses raise funds.
The circular also requires exchanges to provide incentives to market makers, which may include reduced transaction fees, liquidity rebates, and access to enhanced trading facilities.
Market makers must maintain records of orders, trades, quotations, and inventory positions for inspection by the SEC and the exchanges.
Exchanges must submit quarterly reports to the SEC on market makers’ performance and compliance, including disciplinary actions and enforcement measures.
Existing market makers will have six months from the rules’ effectivity to comply with the requirements.
Exchanges, meanwhile, must submit their implementing guidelines to the SEC for approval within 30 days from effectivity.
The rules apply to equity and fixed-income securities listed, traded, or enrolled on exchanges under SEC jurisdiction.
Government securities covered by the Bureau of the Treasury’s Primary Dealer framework are excluded unless the SEC extends the rules in coordination with the bureau. — Alexandria Grace C. Magno