Philippines Stock Exchange

Investing Procedures

What are stocks and securities

Stocks are shares of ownership in a Corporation. When you become a stockholder or share holder of
a company, you become part owner of that company. Securities, on the other hand, are proofs of one’s
ownership or indebtedness in a company.

Types of securities that one can buy in the stock market

1. Common Stock- usually purchased for participation in the profits and control of ownership and
management of the company. Holders of common stock s have voting rights. They are also
entitled to an equal pro rata division of profits without preference or advantage over another
stockholder. However, they have the last claim on dividends and are the last to collect in case of
Corporate liquidation.
2. Preferred Stocks- its name is derived from preference given to the holders of these stocks over
holders’ common stocks. Holders of preferred stocks are entitled to receive dividends, to the
extent agreed upon, before any dividends are paid to the holders of common stocks. However,
preferred stocks usually have a specified limited rate of return or dividend and a specified limited
redemption and liquidation price.
3. Warrants – a Corporation can also raise additional capital by issuing warrants. A warrant,
normally issued on a detachable basis, allows its holders the right, but not the obligation, to
subscribe to a new share at a set price during a specified period of time. It is usually provided free
to set price during a specified period of time
4. Philippines deposit receipt (PDRs) – a PDR is a security which grants the holder the right to the
delivery or sales of the underlying share, and to certain other rights including additional PDR or
adjustments to the terms or upon the occurrence of certain events in respect of rights issues,
capital reorganizations, offers and analogous events or the distribution of or the distribution of
cash dividend on the shares.
5. Small-Denominated Treasury Bonds (SDT-Bonds)- the SDT Bond are long term and relatively risk
free debt securities issued by the bureau of treasury (BTr) of the Republic of the Philippines.

Market Place for Buying or Selling Shares of Stocks and/or Bonds

In the Philippines, the only operating stock exchange is the Philippine Stock exchange (PSE). Its main
function is to facilitate the buying and selling of stocks and other securities through its accredited trading
participants.

Methodology of acquiring and selling shares and SDT Bond bought or sold
 If one wishes to buy shares of stocks or SDT bonds, one must have a stockbroker who will do this. A
stockbroker is a person or a Corporation authorized and licensed by the Securities and Stock Exchange
Commission (SEC) and PSE to trade securities.

Investing Procedures

1. Choose a stockbroker. The PSE has a complete list and information about all its trading
participants who are authorized and qualified to trade either equity or debt securities for you.
2. You shall require to open an account and fill out a reference card and to submit identification
papers for verification. The stockbroker will then assign a trader or agent to assist you in either
buying or selling any listed security. Discuss with the trader what stocks to buy or sell.
3. Give the order to your broker/trader, and then get the acknowledgement receipt.
4. For equity transaction: deliver the stock certificate if you are selling or pay with the settlement
date if you are buying.
5. You shall receive from your broker either the proceeds of sales of your Stocks. Of you wish to
have a physical certificate of the equities you bought, just give instructions to your broker and
pay the required upliftment fee. Buyer of SDT bonds will only be given a confirmation slip in lieu
of the bond certificates.

Opening customers Account

Before an investor can buy or sell securities listed on the Philippines stock exchange z he must first
open an account with a registered Broker/dealer. The maintaining of customer account is subject to SRC
Rule 52.1-6, which provides that every broker or dealer mist maintain customer account as follows:

1. For each account, the following information

a. Customer’s name, residence address and residence telephone.
b. Whether customer is of legal age
c. Whether customer is an institutional customer
d. Nationality
e. Signature of the salesman introducing the account and signature of the partner,
officer or manager who accepts the account
f. The name of any person authorised to transact business on behalf of the entity of
the customer is Corporation z partnership or other legal entity.
2. For each account other than ban institutional account, the broker shall obtain, prior to the
settlement of the initial transaction in the account of the following information to the extent
it is applicable to the account.
a. Customer’s tax identification number
b. Occupation of customer, name, address and telephone number of employee.
c. Whether the customer is employed or otherwise associated with another
broker/dealer.
d. Whether the customer is an officer or director of a company listed on as exchange
 e. The customer’s investment objective and other related information concerning the
customer’s financial situation and needs
f. If duplicate confirmation is required to be sent to another person z the identity of
that person and his relationship to the customer.
3. For discretionary accounts, the broker/dealer shall also
a. Obtain the signature of each person authorized to exercise discretion in the account
b. Record the date such discretion is granted
4. For purpose of this rule, institutional account shall mean the account of
a. A bank insurance company or registered investment company
b. Any other entity set forth in section 10.1 of the SRC as a qualified buyer.
c. Any other entity with total assets of at least P1,200,000,000 provided, however, that
the broker dealer shall obtain from such entity a declaration, under oath, confirming
ownership of such assets.
5. If more than one party is named on the account, new account information shall be obtained
for each party on the account.
6. If the account is a trust account, a copy of the trust as agreement shall be obtained. The
agreement shall specify the types of transaction that the trustee is allowed to perform.
7. A broker dealer is allowed to maintain a numbered account for a client who wishes to keep
his/her name confidential.

Placement and processing of Orders

1. Order placement – one customer has opened an account with a registered broker
dealer, he can already place his orders through the certified securities representative.
The CSR writes an order ticket, which is a record of the customer’s instructions to the
broker dealer and contains such information as, whether to buy or sell, what issue to
buy or sell, the number of shares, the types of order, and the price at which the
customer wishes to buy or sell.
a. Every order received by the broker dealer or any other associated person or
salesman of a broker dealer to buy or sell securities for customers shall be
entered on an order form, which shall contain at minimum, all the information
required by this rule. Each buying or selling order form shall be time stamped by
the broker dealer or any other person acting on his behalf upon receipt of the
customer’s order and upon transmission O the trading floor.
b. All the necessary time recording shall be disclosed in the confirmation to the
customer upon his request.
c. All broker dealer, who deals for their own account either directly or where a
member broker dealer, through another member broker, or trade for a
discretionary account, as well as their partners, floor traders, official and
employees, shall record all purchase and sales order on the same order form used
by such brokers for their customers and such order form shall also be tome
stamped.
 d. Every broker dealer, associated person and salesman of a broker dealer,
executing an order for transaction in securities shall enter on the ticket whether
the transaction will be matched through the exchange trading system or
transacted as block sales in accordance with SCR rule 30.2-8, whether the firm is
acting as agents or principal in connection with the transaction
e. The order ticket shall also reflect the terms and conditions of the order or
instructions, including a notation of the order is a short sale, and any subsequent
modification or cancellation, the name of the customer for which the order was
entered, the name of the salesman who took the order, the price at which
executed and whether the order was solicited or unsolicited.
f. An order is solicited or unsolicited depending on who recommends the security.
If the order is recommended by the salesman, the order ticket should be marked
as solicited, otherwise, it should be unsolicited.
g. All purchase and sales order for the same security and under the same terms and
conditions z including those placed by the broker dealer for its own account for
discretionary accounts and those placed by partners, floor traders, officials and
employees, shall be executed by the broker dealer in the order in which they were
received, provided however, member broker shall comply with SCR Rule 34.1-2
regarding priority of customer orders
h. Al time stamping machine that are being used by broker dealer for the purpose
of this rule should be synchronized at all times in accordance with the official time
of the exchange
2. Processing of Orders – after the order ticket is written by the Certified Securities
Representative, it is time stamped and the other is transmitted to the traders on the
floor of the exchange. The orders are entered by the traders into the automated
trading system as they are received and, except for cross transactions, are prioritized
by price and tine.

Transaction and Trade Settlement

1. Settlement of Transaction – the Securities Clearing Corporation of the Philippines, Inc. (SCCP)
acts as the intermediary in ensuring payments and securities on the deliveries and which
provides the necessary clearing and settlement facilities. SCCP implements delivery versus
Payment settlement which ensures that payment for bought securities would not be
released, without the corresponding delivery and conversely, sold securities would not be
transferred without the payment.
2. Clearing of Certificates – the Philippines Central Depository (PCD) acts as the custodian of the
securities whereby all securities of a particular class or series od any issuer deposited within
the system are treated as fungible and may be transferred, loaned or pledged by book keeping
entry without physical delivery of securities certificates.
3. Report of execution – the CSR will receive a Report after the execution of a trade.
4. Trade Confirmation – this is a printed document that that confirms the trade, settlement date
and the amount of money due from or owed to the customer.