OECD tells SEC what it already knows

Merkado Barkada

December 13, 2024 | 8:10am

The Organisation for Economic Co-operation and Development (OECD) [link] performed a review of the Philippine capital markets at the request of our Securities and Exchange Commission (SEC), and the OECD presented its findings at an event hosted by the SEC yesterday. Part of the findings suggested things that are already well-known to traders and market observers, namely, that the PSE significantly lags behind its regional peers in terms of size and growth, and that there is a huge untapped pool of potential IPOs that remains private due to the high fees of listing and the burdensome process as currently required by the SEC and PSE. According to the OECD’s report, there are as many as 411 companies that could be potential IPOs, and it suggested that the PSE could become more attractive to those companies if it would reduce fees and reform the onboarding process to be quicker and less onerous. It also identified the PSE’s profitability requirement as an antiquated measure that prevents capital markets access to unprofitable companies.

MB bottom-line: Credit where credit is due. I think it shows a certain level of maturity and accountability for the SEC to both engage with the OECD on producing this report, and then also to host the event where the report’s findings were openly discussed. The data is overwhelmingly negative, but this is nothing new. We’ve known (and the SEC has known) that the PSE lags all of its regional peers almost across the board on all major metrics. Many aspects of this report could have been accomplished by a skilled intern using Google. The real magic juice is the market survey that identified a large number of potential listings. Having that number quantified could help the SEC gather the political will necessary to make the changes that need to be made to allow the PSE to grow. At the end of the day, the report basically said that the SEC and the PSE just need to get out of their own way. Lower the fees. Ease the restrictions. Stop making it so difficult to participate. Both the SEC and PSE have been making major changes in recent years, but this report should serve as a wake-up call that there is still so much more work to be done. The only report card that matters is going to be what the SEC and PSE do. The best time to plant a tree was 20 years ago. The second-best time is now. Regulators, it’s time to get planting.

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