SEC Seminar

August 10, 2018

Roel M. Villanueva
Head, Market Control Department
Outline

 Trading Operations

 Block Sale
 About PSE

Manila Stock Exchange Merged in Makati Stock Exchange

(1927) 1992 (1963)
 About PSE

CHRONOLOGY OF EVENTS

The Makati The SEC granted

Stock the PSE its license
Exchange, Inc. to operate as a
(MkSE) was securities
organized exchange
PSE was
The Manila Makati Stock
demutualized
Stock Exchange &
Exchange, Inc. Manila Stock SEC conferred PSE Listed by
(MSE) was Exchange merged SRO status to way of
established to become PSE the PSE. introduction

1927 1963 1992 1994 1998 2001 2003

Trading Operations
Trading Operations

DEFINITION OF TERMS

Best Bid and Offer (BBO)- the highest buying price and
the lowest selling price

Dynamic Threshold- the permitted difference in price

between two Last Traded Price updates for a given
security
Trading Operations
Reference Price shall be:

a. the previous Trading Day’s Closing Price

b. the Adjusted Closing Price (ACP) in the event of

corporate actions that would result to an adjustment of
the Closing Price; or

c. the Last Traded Price or the Last ACP in cases where

there is no trading activity for the Security in the
immediately preceding Trading Day
Trading Operations

Trading Threshold- the allowable price range for any

Security as may be determined by the Exchange from
time to time

Board Lot- the standardized number of shares set by the

Exchange based on a given price range for a Security.

Price Fluctuation (Tick Size)- the allowed price step

based in a given price range for a Security
Trading Operations

Odd Lot- an order with volume or quantity less than the

defined Board Lot

Static Threshold- equivalent to the trading band, shall

mean the lower and upper price limits (i.e., ceiling and
floor prices) of Securities for a given Trading Day
Trading Operations

TRADING DAY AND NON-TRADING DAY

Trading Rules, Article II, Section 1

Everyday shall be a Trading Day except for Saturdays, Sundays, legal

holidays, special holidays, days when the Bangko Sentral ng
Pilipinas (BSP) is closed, and such other days as may otherwise be
declared by the SEC or the Exchange, through its President or duly
authorized representative, to be a non- Trading Day.
 Trading Operations

Trading Hours
9:00AM PRE-OPEN Orders are accepted but no matching occurs
9:30AM OPENING Opening prices are calculated
9:30AM CONT TRADING Continuous order queuing and matching
12:00NN MARKET RECESS No orders can be posted
No order modification and cancellation
1:30PM CONTINUOUS Continuous order queuing and matching
TRADING
3:15PM PRE-CLOSE Orders are accepted but no matching occurs

3:18PM PRE-CLOSE Orders can no longer be cancelled

(No Cancel)
 Trading Operations

3:20PM CLOSING Closing prices are calculated

3:20PM RUN-OFF or Trading continues but only at closing prices
TRADING AT LAST
3:30PM MARKET CLOSE
Trading Operations
LIMIT ORDER
- Entered with a specified price within the instrument’s defined authorized
limit, as set by the Exchange
- Any remaining unexecuted portion of a Limit Order will be added to the
Central Order Book at the entered limit price
Trading Operations
LIMIT ORDER
- Entered with a specified price within the instrument’s defined authorized
limit, as set by the Exchange
- Any remaining unexecuted portion of a Limit Order will be added to the
Central Order Book at the entered limit price

Example: ABC

BID OFFER
Volume Price Price Volume

Buy
Quantity: 1,000 1,000
300
500 15
13 14
16
14 200
700
700
Price: Php15
500
2,000
500 13
11 16
19
16 200
50
200
Done Trade:
2,000
2,000 11 1919 50
700 shares @ 14
Trading Operations
1. MINIMUM QUANTITY
- Orders which must be executed immediately to the extent of a specified
minimum quantity, with any remaining unexecuted portion being added to
the Central Order Book;

Example 1: ABC

BID
BID OFFER
OFFER
BID OFFER
Volume
Volume Price Price
Price Volume
Volume
Buy Limit Volume Price Price Volume
Limit Price: Php20
Quantity: 1,000 1001,000 1820
(100) 2020 100
100
Min. Qty: 100 900 20 23 800
200100 1718 2323 800
800
100 18 25 1,500

200
200 1717 2525 1,500
1,500
Done Trade:
100 shares @ 20
Trading Operations

1. MINIMUM QUANTITY
- In case of Order with Minimum Quantity, the Minimum Quantity specified must be
filled immediately upon order entry otherwise order will be eliminated.
- Minimum Quantity applies only to the first trade.

Example 2:

ABC

BID OFFER
Volume Price Price Volume
Buy Limit
Limit Price: Php20
Quantity: 1,000 100 18 20 80
Min. Qty: 100
200 17 23 800

25 1,500

Order will be eliminated

Trading Operations
2. ICEBERG (DISCLOSED) QUANTITY
- Orders which are successively entered in the Central Order Book, and disclosed
to the market at specified tranches

ABC

BID
BID
BID OFFER
OFFER
Volume
Volume
Volume Price
Price
Price Price
Price Volume
Volume
Buy Limit
Limit Price: Php20
Quantity: 1,000 (900)100
100 100
(1,000) 18
20
20 20
23
20 100
800
100
Disclosed Qty: 100
200
100 17
18
18 23
25
23 1,500
800
800

200 17
17 25
25 1,500
1,500
Done Trade:
100 shares @ 20
Trading Operations

BY LOT SIZE
Normal (Main)
– order with volume in multiples of the board lot

Oddlot
– order with volume less than the board lot or
minimum shares requirement
Trading Operations
Tick table Tick Size Lot Size
From To
0.0001 0.0099 0.0001 1,000,000
0.0100 0.0490 0.0010 100,000
0.0500 0.2490 0.0010 10,000
0.2500 0.4950 0.0050 10,000
0.5000 4.9900 0.0100 1,000
5.0000 9.9900 0.0100 100
10.0000 19.9800 0.0200 100
20.0000 49.9500 0.0500 100
50.0000 99.9500 0.0500 10
100.0000 199.9000 0.1000 10
200.0000 499.8000 0.2000 10
500.0000 999.5000 0.5000 10
1000.0000 1999.0000 1.0000 5
2000.0000 4998.0000 2.0000 5
5000.0000 UP 5.0000 5
Trading Operations

Account Code
• All investors must be identified with a PSE account
code
• The account code will identify the investor type and
its nationality flag
• Account code must be used when posting an order
for an investor in the PSE trading system
• Each account code must correspond to a unique
back-office code in the TP’s system
Trading Operations
By Account Type
“Principal” – if order is for the account of the Broker-
Dealer
“Retail” – if order is for a Taxable Retail Client
“Institutional” – if order is for a Taxable Institutional Client
“Tax-exempt” – if order is for a Tax-Exempt Client
“Aggregate” – if order is for various clients that are
grouped such as funds
“Related Party” – if order is for the owner, director, officer,
employee or other associated persons of the
Corporate Trading Participant
By Account Type
“Error” – if order is to offset a trading error like
overbuying or overselling

By Nationality
“Local” – if order is for local investors
“Foreign” – if order is for foreign investors
Trading Operations

Foreign Ownership Limit

• Certain securities have ownership limit restriction to
foreign investors

• The trading system automatically adjust the foreign

ownable shares as orders/trades occur in the market

• The system will reject any incoming foreign buying

order that will breach the foreign limit
Trading Operations

Trade Amendment
Amendment of account codes is allowed provided that it comply
the following provisions:

• Local account code can only be amended to another local

account code and error account

• Foreign account code can only be amended to another foreign

account code and error account

• Nationality of error account will always follow the nationality of

the broker
Trading Operations

• Aggregated account cannot be amended

• A processing fee of ₱100.00 will be charged for every amended

contract

• Deadline for submission of amendment is 12:00 nn of T+1

Trading Operations

Aggregation of Client Orders

a. Trading Participant shall maintain an account code that

exclusively caters to aggregated Orders;

b. Trading participants shall ensure compliance with the System

Order Ticket Rule and Best Execution Rule when aggregating
an Order of a client with the order of another client;

c. Salesman/ Traders shall not aggregate the Order of a client

with their proprietary account;
Trading Operations

d. A foreign aggregated Order can be unbundled into a foreign,

local and/ or error account;

e. A local aggregated Order can only be distributed to local clients

and/ or error account;

Partially Matched Aggregated Order:

Distribute in a fair and reasonable manner, consistent with

the best interest of the clients.
Trading Operations
Done-Through Transaction
A Trading Participant (TP) may execute a transaction through
another TP

Only client orders can be subject of a Done-Through transaction

Done-through transaction is always composed of a requesting TP
and an executing TP

Executing TPs shall maintain a designated account for done-

through transactions
Trading Operations

Done-through orders cannot be part of an aggregated order

Amendment of done-through transaction is prohibited

Both the requesting and executing TPs shall report to CMIC the
details of the done-through transaction no later than 12:00nn of
T+1
Trading Operations
• Static Threshold
- also known as trading band
- the maximum and minimum price allowed for
the day
- is set at 50% +/- from the previous close price

• An incoming order with a limit price beyond the Lower and Upper
Limits will be rejected by the system
Trading Operations
• Dynamic Threshold
- allowable price change from one trade price to the next trade price
- is not triggered when breached during the closing period
- securities are classified into three clusters:

Securit Trade Frequency Qualifier DT

y (%)
A traded 20 times or less in the past six 20%
months
B traded 500 times or less but greater than 15%
20 times in the past six months
C traded more than 500 times in the past six 10%
months
Trading Operations
• Dynamic Threshold

Instrument
Instrument
Status:
Status:
Authorized
Frozen
Example 1:

LTP : 105
Dynamic Threshold: PhP 2
BID OFFER
Buy Limit Volume Price Price Volume
Price: Php108 28 000 105
108 108 10,000
Quantity: 8,000
1 000
2 104
105
11200
000 100
104
1 200 100

• In this case, the LTP is 105 and the execution price of the
incoming order is 108. Thus, the incoming order breaches the
dynamic threshold of PhP 2 which causes the freezing of the
instrument.
 Trading Operations
• Dynamic Threshold
Instrument
Instrument
Status:
Status:
Authorized
Frozen
Example 2:
LTP : 106
Dynamic Threshold: PhP 2 Tick
TickSize:PhP1
Size:PhP1
BID
BID OFFER
OFFER
Buy Limit Volume
Volume Price
Price Price
Price Volume
Volume
Price: Php109 2 000 105 106
106 4,000
4,000
8 000 109
Quantity: 8,000 1 000 104 107 1,000
2 000 105 107 1,000
1200
1 000 100
104 108
108 2,000
2,000
1200 100 109
109 500
500

4000 shares @ PhP106

1000 shares @ PhP 107
2000 shares @ PhP 108

• Since there is still a remaining unmatched quantity of 1,000 shares

which can match the selling order @ 109, the order will cause the
instrument to freeze since Php 109 is more than Php 2 higher than
the LTP = 106.
Trading Operations

• Normal Market
– Continuous matching based on Price-Time-Broker
Priority
– Trading at the defined board lot and price fluctuation
• Block Sales
– Big lot transaction which is negotiated between
parties
• Oddlot Trading
– Trading of shares less than the defined board lot
Trading Operations

A cross transactions shall be made only in accordance with the

following requirements:

a. Its price shall be within the BBO;

b. In the absence of the BBO, the price shall observe the

limitations set out in the Implementing Guidelines;
 Trading Operations

c. It shall not be entered during the Pre-Open/ pre- Close Period;

d. When done during the Run-Off/ Trading-at-Last period, it shall

be at the Closing Price;

e. All pre-arranged transactions meeting the requirements set by

the Exchange shall be executed in the Block Sale Market and
not through a Cross Order entry.
Trading Operations

Automatic Cross

There shall be an automatic cross during the Market Open/

Continuous Trading and Trading-at-Last/ Run-Off Period

TP has a posted Order and posts another counterpart Order at the

same or better price.

In such events, the Trading Participant shall have the priority

among other Trading Participants
Trading Operations

Odd Lot
– Allows trading of shares less than the defined board lot
– Partial matching of oddlot orders is allowed
– No dynamic threshold for odd lot market
– Price of oddlot is subject to the static threshold the same as
the Normal Market
– Oddlots can be traded only during the Continuous Trading
Phase (9:30 – 12:00 and 1:30 – 3:15)
 Trading Operations

Order Modification

• Modification of orders is not allowed during the last 15 minutes of

the Pre-open period and last 2 minutes of the Pre-close period.

• A posted and unmatched Order may be modified without losing its

priority in the Order queue if it involves any or a combination of
the following:
i. a decrease in its volume;
ii. a modification of validity type; or
iii. a modification of client account code.
 Trading Operations

• A modified Order loses its priority when it involves any or a

combination of the following:
i. an increase in its volume;
ii. a modification of the price entered; or
iii. a modification of the trigger price entered.
 Trading Operations

Order Cancellation
• Cancellation of orders is not allowed during the last 15 minutes of
the Pre-open period and during the last 2 minutes of the Pre-close
period.

• However, the Exchange will cancel all orders in the ff instances:

- If the security has a corporate action that would affect the
closing price
- On ex-date for security which declared cash or property
dividend
- Security that crosses a board lot
Trading Operations

Trade Cancellation

The Exchange cannot cancel matched Orders or Trades except in

the following instances:

a. Evident mistake

b. Computer or system error

Trading Operations

Trading Halt
a. The Exchange or the SEC may halt the trading of a Security
pursuant to existing Rules, applicable laws and regulations.

b. Orders, other than Cross Orders, can be posted, modified or

cancelled notwithstanding the Trading Halt of a Security.

c. The trading of any warrant, preferred or any Security that

directly derives its value from the Security subject of the
trading halt will also be halted.
Trading Operations

Trading Suspension

The Exchange or the SEC may suspend the trading of a Security

pursuant to Rules, implementing Guidelines and applicable laws
or regulations

No order management
Trading Operations

Circuit Breaker
a. Trading in the market will be temporarily halted in case the
PSEi decreases by at least 10% compared to the previous
closing level of the PSEi.
b. Trading in the market will resume within fifteen (15) minutes
after a circuit breaker is discharged.

c. Market Halt due to the breach of the circuit breaker shall be

implemented only once in a Trading Day.

d. A circuit breaker will not be triggered thirty (30) minutes

before Market Close.
 Trading Operations

Block Sales
– Volume can be non-multiples of board lot
– Price may not follow the price fluctuation
– Can be executed intra-firm or inter-firm
– Requires submission of form and approval of the Exchange
– Execution can be done from Pre-open to Trading At Last

Regular Block Sales –

i. Min value of 20M
ii. Price should be within the +/- 5% from the previous close
iii. Requires approval of the MOD Head only
iv. Application shall be acted upon within 30 minutes from receipt
Trading Operations

Special Block Sales –

i. Min value of 50M
ii. Can be at any price
iii. Requires approval of the COO
iv. Supporting documents shall be submitted
v. PSE will act on the application within two trading days
Thank you!

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