The Philippines’ first Electronic Securities Issue Portal (e-SIP) that would allow the online registration and processing of documents in the primary market has gone live in April of this year, clearing the way to the streamlining and digitalization of transaction flows in the country’s capital markets.
In a report to Finance Secretary and Capital Market Development Council (CMDC) Chairman Carlos Dominguez III, the Philippine Dealing System Holdings Corp. (PDS Group) said that Ayala Land Inc. (ALI) became e-SIP’s pilot user with its offer of a four-year P10 billion bond last April 21.
Tomorrow (May 4, 2021), ALI will also become the first company to list its corporate bond offer in the capital market and the Philippine Dealing & Exchange Corporation (PDex) using the e-SIP.
“Instead of submitting voluminous documentation twice for the PDS Registry and the Philippine Dealing & Exchange Corp, (primary market issuers) would now only have to submit once electronically, doing away with the paper-based submissions,” said Ma. Theresa Ravalo, the President-CEO of the PDS Group’s Philippine Depository & Trust Corp. (PDTC) and the Philippine Securities Settlement Corp. (PSSC).
The CMDC, a coordinating body tasked to facilitate the development of the Philippine capital market, is also co-chaired by lawyer Benedicta Du-Baladad, former President of the Financial Executives Institute of the Philippines (FINEX), and Securities and Exchange Commission (SEC) Chairman Emilio Aquino.
“We hope to get more issuers to soon follow ALI and get onboarded onto the system,” Ravalo said in her report during a recent CMDC meeting.
Dominguez commended PDS for implementing the e-SIP project, which, he said, would not only digitize the capital markets but would also benefit the environment as doing away with voluminous paper-based submissions would save millions of trees.
“This is a very good initiative, and we’d want to see how we are doing on a periodic basis,” Dominguez said.
The e-SIP portal would also allow investors to make their reservations for the bond issuances through electronic means and enable issuers to expand their reach by selling their securities online, Ravalo said.
Because some issuers have yet to familiarize themselves with electronic-based transactions, Ravalo said the PDS has made the use of the portal optional.
“What used to be a paper-based process for the issuers and investors, requiring submission of physical documents and, in the case for investors in the provinces, shipment of these documents to head offices for submission to the Registry, with the e-SIP portal there is now the option to submit electronically. For the issuers, this would mean wider reach for their investors,” Ravalo said.
Ravalo said e-SIP also reduces the time for the submission of the issuer’s requirements from three days to only one day, allowing more time for distribution.
She said the next step in the e-SIP project is to digitize the paperwork-heavy pre-settlement processes in the corporate bond secondary market.
The PDS is targeting to implement this second phase of the project by the third quarter of 2021.
“Doing away with paper would generate more liquidity in the market because paper is one of the reasons that market players have cited to cause some friction in liquidity,” Ravalo said.
During the meeting, Consuelo Garcia and Jose Emmanuel Hilado of FINEX presented before CMDC a digital roadmap for the Philippine capital market, which covers 1) government bonds and corporate/bank bonds, (2) trust funds and mutual funds, (3) and common shares and perpetual preferred shares.
Dominguez reminded FINEX of the importance of embedding cybersecurity safeguards into these digitized systems to protect stakeholders from potential financial losses and other threats.
Garcia said that a team formed for this effort has agreed that the digital platform for the capital markets would cover primary and secondary transactions, and should connect to other registries such as the national ID system and electronic trading and settlement channels.
The team also agreed that the platform should be easily accessed by retail customers through their desktops, mobile phones and other devices, Garcia said.
According to Hilado, the goal of the project is to digitize the whole life cycle of bonds, from issuance to distribution, to trading and up to custody of the securities.
“This will take away the pain points of the retail investors so that we can make it more cost efficient for everyone. If we are able to do this, then we can say that we have democratized bond investing,” Hilado said.
Hilado said digitalization will do away with investors filling up forms and going to the banks to process their transactions in order to buy financial instruments.
“The ideal set-up is the Bonds.PH app initiated by the Bureau of Treasury (BTr) in partnership with PDAX (Philippine Digital Asset Exchange), as the developer of the platform and Union Bank as the broker-dealer. The app allowed small investors, including OFWs, to buy Retail Treasury Bonds and the Premyo Bonds from anywhere using their mobile phones and other devices,” said Hilado.
Treasurer Lea de Leon said that the Bureau of Treasury and the SEC are already in discussion on how to expand the platform to encourage other stakeholders to participate in the further digitalization of government bonds.