(Source: PDEx brochure)

Last month, reader Ricardo Pitogo asked this question in MoneySmarts, in reaction to my first post on the OFW bonds:

I read your article on the planned OFW bonds. But I am more interested in learning to trade bonds. I read the article of Dr. Noet Ravalo in the PDI on bonds. May I know if the Bond Trading Platform has already been put up by the Bankers Association of the Philippines? If so, how can I contact it? Lastly, do you happen to know if the Treasury Department of the Bangko Sentral ng Pilipinas can be a venue to buy and sell bonds? Thank you very much for your kind attention. – Ricardo M. Pitogo

Dr. Noet Ravalo answered him in his article today. Here’s an excerpt:

The trading platform that is currently operational is the one used by dealers to transact government securities in the “spot market”. For now, the participants are the larger institutions and the object of trade are Philippine treasuries. The PDS infrastructure follows the international best practice of Delivery-versus-Payment (DVP), which literally means that adequate balances of securities (for the seller) and cash (for the buyer) must be both available before the transaction goes through. While this may seem to be an obvious requirement for a “spot securities market”, it may interest you that in the old design, the seller would only know at the end of the trading day if the buyer had sufficient cash to pay for the securities.

That last part, to me as a retail investor, didn’t sound so good. But Noet continues.

All transactions must be reported to a central system within a few minutes of trade. That is not going to happen in a vacuum and this needs to be addressed just as we need to address the needs of the investor who happens to be based in Ilocos, Palawan or Bacolod. The ideal is for the investing public to have equal information about the latest market price for each traded instrument. This would introduce price transparency and eliminate “privileged information” if and where it exists.

And I snip again..

Not only can individual investors now really participate in an organized market where prices are transparent and accessible, we can actually move beyond the “spot transactions”. We can consider for example a more active play in the money market (repos, securities borrowings) to augment our returns and in forward transactions to hedge our needs. Hopefully soon, corporate bonds may likewise flourish so that issuers don’t have to risk a foreign currency exposure and that local liquidity can be used for local fixed capital formation.

For those who are raring to trade bonds, December 19 is the critical date. That is the day when the rules will be fully enforced and you can begin trading bonds through your well-chosen brokers. Good luck!

Oh and Ricardo, here are PDEx’ contact details:

Main Line: +632-884-5000
PDEx Tel: +632-884-5005 to 06
Fax: +632-884-5098 to 99
Email: pdex@pds.com.ph

Office Address:

37/F, Tower 1, The Enterprise Center
6766 Ayala Avenue corner Paseo de Roxas
Makati City

Or you can just shoot questions through MoneySmarts.

Read the full article here.