Philippines SEC sets capital floor for market makers

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SEC sets capital floor for market makers

Highlights

SEC Memorandum Circular No. 28, Series of 2026, sets a P150-million minimum capital requirement and accreditation for market makers effective Oct. 15.
Market makers and exchanges must comply with record-keeping, reporting, and incentive provisions, including quarterly performance reports and possible fee rebates.
Existing market makers have six months to comply, while exchanges must submit implementation guidelines within 30 days; rules cover equities and fixed-income securities except government securities.

Capital rules and accreditation process

As reported by BusinessWorld, citing the Securities and Exchange Commission, firms seeking to act as market makers must meet a P150-million minimum capital requirement and secure accreditation or recognition from the relevant exchange under SEC Memorandum Circular No. 28, Series of 2026, issued on Oct. 15.

Under the framework, applicants must show adequate operational capacity and a satisfactory track record. Each firm must also appoint at least one specialist with at least three years of relevant experience in securities trading or market making, or equivalent qualifications based on certifications, training and demonstrated proficiency.

For equities, market makers must maintain firm buy and sell quotations for a minimum period set by the exchange and comply with applicable market participation requirements. Those quotations must generally be executable, except during system failures, market-wide disruptions or other cases allowed under exchange rules.

For fixed-income securities, exchanges will set quotation requirements based on the characteristics and liquidity of each security, the trading mechanism and prevailing market conditions. Exchanges will also decide whether quotations must be firm, indicative or provided on a best-efforts basis, along with the minimum time they must be maintained.

Expected market impact and compliance timeline

The SEC says market-making mechanisms are widely used to improve liquidity, strengthen price discovery and support capital formation, although their operation differs between equity and fixed-income markets because of differences in market structure and trading conventions.

SEC Chairperson Francisco Ed. Lim says the framework is intended to encourage trading activity in the domestic capital market and reduce friction in secondary-market transactions. Finance Secretary Frederick D. Go says a more liquid capital market could make it easier for investors to participate and for businesses to raise funds.

The circular also requires exchanges to provide incentives to market makers, which may include lower transaction fees, liquidity rebates and access to enhanced trading facilities. Market makers must keep records of orders, trades, quotations and inventory positions for inspection by the SEC and exchanges, while exchanges must submit quarterly reports on performance, compliance, disciplinary actions and enforcement measures.

Existing market makers have six months from the rules' effectivity to comply, while exchanges must submit implementing guidelines to the SEC for approval within 30 days from effectivity. The rules apply to equity and fixed-income securities listed, traded or enrolled on exchanges under SEC jurisdiction, while government securities under the Bureau of the Treasury's Primary Dealer framework remain excluded unless the SEC extends the rules in coordination with the bureau.

In our earlier coverage of planned Philippine sovereign bond reforms, we outlined how a new pricing convention and the push for index inclusion could broaden the investor base and support liquidity and price discovery. We also noted that these market-structure upgrades are not automatic engines of real-economy growth, and that deeper domestic capital markets, investor trust, and credible policy follow-through are still needed for businesses to access financing more effectively.

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