In line with its mission to develop and deepen the Philippine capital markets, MART has been in discussion with PDEX on various issues concerning the PDEX trading system, fixing of rates, trading guidelines and conventions. Through the MART Fixed Income Subcommittee, the MART-PDEX Trading Participants raised their concerns in a letter addressed to PDEX President and COO, Mr. Cesar Crisol last August.

In response, PDEX addressed some trading system related concerns in a separate letter. As mentioned in the letter, other issues raised in the MART letter are more appropriately addressed by the PDEX Market Governance Board (MGB).

Below is the list of issues raised by the MART Fixed Income Subcommittee:

A. PDEX Trading Platform /Workstation

1. The PDEX Platform/Workstation remains incapable of automatically adjusting settlement amounts in cases of sudden holidays or trading stoppages. This results to confusion and inefficiencies as participants have to manually compute for the adjustment of settlement amounts. We would like to request PDEX to enhance the system to allow automatic adjustment of settlement amounts, and should come up with proper contingency guidelines that would allow settlement in the most seamless manner. Likewise, contingency guidelines on the Fixing rates computation should also be set for shortened trading days.

In addition, in these cases of contingency, own bank dealer and bank broker trades intended to be settled via the eDVP should be given the flexibility to settle same day. 

2. Erroneously mapped trades should be allowed to be cancelled even on the next business day. If both counterparties agreed that the mapped trade does not reflect the true terms of the dealt trade, the erroneous mapped trade shd be cancelled, and the correct trade mapped. Otherwise, the accuracy of the fixing rates will be compromised.

3. Our members observed that the current level of IT support is still slow and inadequate to service the needs of the market. This poses problems, especially during moving markets. 

Moreover, when the system goes down, the market is usually not informed if it is a market-wide occurrence or bank-specific. The adequacy of the back-up system for such problems is uncertain. There were instances where bank broker terminals cannot map trades real-time. 

4. For afternoon trades, it has been noted that the Negotiated board shifts from a YTM format to a Price format when players map trades, causing mapping delays, and unnecessarily increasing the chance of breaching the prescribed time for mapping. The usual default modes of the negotiation box, eg, YTM format, should remain even for the afternoon trading session.

B. Concerns: Fixing Rates ( F, R1, R2 )

1. Although a noble idea, the current rate reasonability monitor of done deals via pop-up message is bothersome in a moving market. This causes mapping delays, increasing the chance of mapping beyond the prescribed time. Further delays may be experienced as the system hangs for a prolonged time due to several open messages
and pending trade tickets. It is proposed that the parameters set for verifying rate reasonability be revisited.

2. We would like to request for an update on the implementation and timeframe on the proposed inclusion of the large-sized, liquid benchmark bonds as part of the fixing curve. 

3. It was observed that the number of Market-Making Banks has decreased significantly. However, no announcements were made regarding these changes in classifications and hence no verification of fixing composition. We request that PDEX release an updated list of the market making banks on a regular basis. 

4. There is also a concern that the credibility of the Fixing may be compromised if more market-making banks pull out, as the prices will not become reflective of current prices due to a smaller representation. 

C. Trading Guidelines and Conventions

1. We would like to seek clarification from PDEX as the SRO on the capabilities of the broker participants to trade and hold inventory under the SRC rule. Can broker participants trade without executing corresponding real-time trades with clients? Is this allowable under the SRC rule, given the separation of functions between broker and dealer? 

2. May we get assurance from PDEX as the SRO that only legitimate trades are being mapped in the PDEX trading platform. This is in relation to concerns raised by the market on alleged “wash trades” or ”ghost trades” or ”booked-and-cancelled trades”. Market manipulation aspect of such trades should be ruled out by the SRO. 

3. Participants have agreed that yields for trading will only be up to a maximum of four decimal places. This measure is intended avoid confusion and make trading uniform with the official fixing rates. We would like to request PDEX to configure the Auto Board and Nego Board to implement this agreed convention.

DOWNLOAD THE MART LETTER TO PDEX HERE
DOWNLOAD THE PDEX RESPONSE LETTER HERE