The Securities and Exchange Commission (SEC) said shortening the settlement period for stocks trading will improve the overall systemic risk for the capital market.
The new rule, which requires buyers and sellers of stocks to deliver their respective payment or securities to the other party two days (T+2) after the trade is made instead of three days (T+3), took effect yesterday.
The SEC said the rule will “facilitate more efficient transactions and spur activity in the Philippine capital market.”
“Risk exposure for trading participants will likewise be reduced by one day,” the SEC said.
Emilio Aquino, SEC chairman, said the shortened settlement cycle is in line with global standards and supports the SEC’s mission to facilitate cross-border trading and encourage more investors to trade in the local stock market.
“This will reduce the credit and market risks of unsettled trades, as well as liquidity risks in the payment system, thus reducing the overall systemic risk for the capital market. It will also encourage greater efficiency in the clearing and settlement process for securities trades. Accordingly, it will contribute in promoting the development of the Philippine capital market and protection of investors,” Aquino said.
“The SEC is continuously crafting plans to introduce institutional changes that would help develop and further deepen the Philippine capital market, as we aim to lift investor confidence amid the trend in both regional and global markets today,” he added.
