The Philippine Dealing System Holdings Corp. (PDS Group) is planning to launch the Philippines’ first-ever digital corporate bond in February 2022 as part of its initiatives to utilize digital technologies to deepen the domestic capital markets, and as a proof of concept on the use of Distributed Ledger Technology (DLT) in the corporate bond market.

Philippine Dealing & Exchange Corp. (PDEx) President &CEO Antonino Nakpil said in his report to the Capital Market Development Council (CMDC) that the proposed digitalization roadmap for the corporate bond market which includes the use of Distributed Ledger Technology (DLT) for the Registry and Depository, complements and links with the electronic Securities Issue Portal (e-SIP).

The e-SIP already allows the online submission of documents required for PDEx Listing and Philippine Depository & Trust Corporation (PDTC) Registry services and facilities for Issuers and Underwriter-Selling Agents in their Initial Public Offerings for Corporate Bonds.

Nakpil said the PDS has been working closely with a Fintech firm from Singapore on a Proof-of-Concept (POC) DLT-backed Digital Registry & Depository infrastructure to test this system’s functionality and performance as well as its integration with the e-SIP.

“The goal of the POC is to deploy a viable DLT-powered Digital Registry and Depository that will be resilient and robust enough to support the full life cycle of a Digital Bond from issuance, asset servicing, transfers and settlement up to maturity, Nakpil said during a recent CMDC meeting.

“The PDS is aiming to conduct an end-to-end test of the Digital Registry and Depository with market participants by January this year and is targeting its possible live launch with an issuance of a Digital Bond by late February,” Nakpil said.

Finance Secretary Carlos Dominguez III, who co-chairs the CMDC, congratulated the PDS on this initiative.

The CMDC, which is also co-chaired by lawyer Benedicta Du-Baladad of the Financial Executives Institute of the Philippines (FINEX), and Securities and Exchange Commission (SEC) chairperson Emilio Aquino, is a joint public-private sector coordinating body tasked to promote and develop the Philippine capital market.

Dominguez said that while he welcomes these digitalization initiatives to further develop and deepen the country’s capital markets, he is concerned over the possibility of hackers mounting malicious attacks on these digital systems.

“I’m telling you this type of digitalization is probably going to be a target for hackers and scammers, and just plain thieves,” Dominguez said.

Nakpil assured the Finance Secretary that PDS has an ongoing vulnerability assessment and testing program to immediately address any possible threats to its systems.

During the meeting, the PDS also reported updates on the second phase of e-SIP for the secondary market, which includes its cybersecurity hardening to ensure that the necessary security measures are in place before PDS launches the Portal’s secondary market utilities for its stakeholders.

The PDS Group is also working with the Bankers’ Association of the Philippines (BAP) and the National Association of Securities Broker Salesman, Inc. (NASBI) to maximize the use of e-SIP in the standardization and digitalization of processes for customer suitability. This initiative looks to do away with a tedious process for investors to keep filling up the same forms several times when buying corporate bonds from different brokers.

-oOo-