The Monetary Board (MB) approved the exclusion of debt securities acquired as a result of market making activities of BSP Supervised financial institutions (BSFI) from the Single Borrowers Limit (SBL) for 90 and 60 calendar days as part of the BSP’s commitment to contribute to capital market development in the country.
The new policy provides that debt securities acquired from market-making activities from 1 August 2020 to 31 July 2021 will be excluded from the SBL computation for 90 calendar days from the time of acquisition of the securities. Beginning 1 August 2021, said debt securities will only be excluded from the SBL computation for a period of up to 60 calendar days.
Governor Benjamin Diokno explained that “The SBL relief will provide BSFIs with additional latitude to engage in market making activities and enable them to continue providing prices for the debt securities in the secondary market as well as to make available an exit mechanism for investors to liquidate their holdings”. Governor Diokno further highlighted that this initiative “will ultimately promote liquidity and price transparency in the market”.
The BSP emphasized that the debt securities acquired from the market making activities will only be excluded from SBL computation if these are executed in accordance with the rules and guidelines of the Securities and Exchange Commission and the market/exchange where such securities are traded and/or enrolled.
The application of SBL relief shall also be subject to the following conditions:
- The market-making positions will be taken up in the trading book;
- The market-making positions will be properly identified and segregated from the market maker’s proprietary positions; and
- The market value of the subject debt securities and the number of days the securities have been outstanding from date of acquisition will be periodically monitored.