SEC to liberalize ‘repo’ market for gov’t debt
The Securities and Exchange Commission (SEC) is seeking to expand the market for government securities repurchase agreement (repo) by including other entities in hopes of deepening the Philippine capital market.
The corporate watchdog said in a statement on Tuesday that it was “taking proactive steps” to potentially include nonbank financial institutions in the repo market.
At present, only banks are considered repo market participants, or government securities eligible dealers.
Repo involves the sale of government securities with an agreement to repurchase them at a later date for a predetermined price.
The local repo market was revived in late 2017, led by the Money Market Association of the Philippines, a private organization of bank treasurers and traders.
“The repo market is envisioned to support the market-making activities of government securities dealers in the country,” SEC Chair Emilio Aquino said.
Liquidity boost
“Expanding this market provides us with another opportunity to improve liquidity, manage short-term funding and boost overall market activity,” Aquino added.
This comes four months after the National Association of Securities Broker Salesmen Inc. (Nasbi) confirmed that trust entities were in talks with the Bureau of Internal Revenue to become repo players by exempting them from paying documentary stamp tax during transactions.
The renewed push to liberalize the repo market also comes decades after regulators clamped down on repos in the early 2000s, calling them a threat to the stability of the country’s financial system.
The Bankers Association of the Philippines, which helped organize Nasbi, aims to increase trading volume by adding more repo players. This way, there can be an alternative benchmark for short-term loan rates.
The SEC also said it was working on identifying “the most appropriate” self-regulatory organization for the local repo market to ensure its long-term viability.
