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BusinessWorld

SEC sets P150-M capital floor for market makers

THE Securities and Exchange Commission (SEC) has set a P150-million minimum capital requirement for firms seeking to act…

Context & Analysis

The move is best read as a quiet but meaningful upgrade in how Philippine securities markets are expected to operate. Market makers do not merely quote prices; they stand ready to buy and sell, which helps narrow spreads, reduce execution uncertainty, and keep trading orderly when sentiment turns nervous. By tying participation to a higher financial base, the SEC appears to be asking firms not only for technical capacity but also for balance-sheet resilience. That matters because a market maker that cannot absorb short-lived dislocations can become part of the problem rather than the solution, especially in thinly traded issues where liquidity can evaporate quickly.

Local businesses should notice this beyond the trading floor. Listed companies rely on credible price discovery when raising capital, issuing bonds, or benchmarking valuations for strategic deals. If market-making activity is performed by better-capitalized firms, the quality of quotes may improve over time, though it could also mean fewer smaller participants enter the space. For institutional investors and retail traders alike, the practical test will be whether spreads tighten, order books deepen, and execution becomes less erratic during volatile sessions. The rule may filter out marginal entrants, but it should reduce the risk of a market maker defaulting into illiquidity at exactly the moment when liquidity is most needed.

This also fits a broader regulatory pattern: Philippine authorities have been pushing for more robust intermediation standards as the capital market matures and becomes more integrated with regional and global flows. Higher capital floors are not glamorous, but they can raise the bar for operational discipline, risk controls, and continuity of service. Watch next for guidance on how existing firms will comply, whether grandfathering or transition periods apply, and which segments—large caps, small caps, debt instruments, or exchange-traded products—see the biggest changes in quote behavior. If the rule is implemented clearly, it could strengthen confidence that Philippine markets are being run with an eye not just toward activity, but toward durability.

Analysis by IJE Software — original commentary on the story above.

This is an excerpt. Read the full article at the original source:

Source: bworldonline.com

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