SEC sets market-making rules to boost liquidity
The Securities and Exchange Commission (SEC) has issued rules on market making to improve liquidity and price discovery in the Philippine capital market, setting a P150-million minimum capital requirement for qualified trading participants.
SEC Memorandum Circular No. 28, Series of 2026, issued on Oct. 15, establishes eligibility requirements, trading obligations and safeguards for market makers.
Market-making involves simultaneously posting buying and selling prices, or two-way quotes, to ensure liquidity and maintain fair and orderly trading.
The rules cover equity and fixed income securities listed, traded or enrolled on exchanges under SEC jurisdiction.
Government securities under the Bureau of the Treasury’s primary dealer framework are excluded unless the SEC, in coordination with the treasury, expressly extends coverage.
“We expect this framework to help reduce frictions in secondary-market trading, support more efficient price discovery, and foster a more competitive trading environment for both domestic and international investors,” SEC Chair Francis Lim said.
To qualify, trading participants must have minimum unimpaired paid-up capital of P150 million, or a higher amount prescribed by the SEC. They must also demonstrate operational capacity and a satisfactory track record.
Accreditation or recognition will be handled by the relevant exchange under SEC oversight, without a separate commission-level process.
Each accredited firm must designate at least one specialist with three years of relevant securities trading or market-making experience, or equivalent qualifications.
For equities, market makers must maintain firm, executable two-sided quotations during an exchange-prescribed portion of the trading session.
Exceptions include system failures, market-wide disruptions and force majeure.
For fixed income securities, exchanges will set quoting parameters and determine whether quotations are firm, indicative or best-efforts, taking into account market conditions and each security’s characteristics and liquidity.
Exchanges must grant incentives, which may include reduced transaction fees, liquidity rebates and access to enhanced trading facilities.
Market makers must keep records of orders, trades, quotations and inventory positions available for inspection.
Exchanges must submit quarterly performance and compliance reports, including disciplinary actions and enforcement measures.
