The Securities and Exchange Commission (SEC), in coordination with local exchanges, issued draft rules on June 17 to establish a regulatory framework for market making in listed securities. The commission is currently soliciting public feedback on the proposed guidelines, with the submission period open until July 7, 2026.
Under the proposed framework, market making aims to increase liquidity, facilitate price discovery, and support orderly trading within the Philippine capital markets. The draft rules outline the strict eligibility criteria, disclosure requirements, and operational obligations for entities wishing to participate.
Eligibility and Capital Requirements
According to the draft guidelines, only trading participants of an exchange that hold a valid license from the commission are eligible to act as market makers.
The SEC noted that eligible firms must maintain a minimum unimpaired paid-up capital of 100 million pesos. Furthermore, applicants are required to demonstrate adequate trading experience, hold a clean regulatory and legal record, and possess a valid market making agreement with the issuer, the exchange, or an authorized third party.
Operational Obligations and Incentives
The draft rules state that registered market makers must maintain continuous, firm, and executable two-sided quotations during trading hours. They are also required to hold sufficient inventory to support liquidity provision, except during system failures, market-wide disruptions, or force majeure events.
To encourage participation, exchanges may offer specific incentives to authorized market makers. These incentives include reduced transaction fees, liquidity rebates, and access to enhanced trading facilities, according to the document.
Reporting, Oversight, and Public Comments
The framework introduces structured reporting and oversight mechanisms to maintain market integrity. Market makers must submit timely trading and quotation reports, compliance certifications, and immediate notifications of any material breaches to the exchange, which will then report regularly to the SEC.
The commission stated that exchanges will be required to adopt and operationalize their own implementing guidelines, subject to SEC approval. Interested parties may submit their comments on the draft rules via email to [email protected].
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