SEC's New Float Rules Could Revive Philippine Stock Market

The Securities and Exchange Commission's proposed tiered public-float framework represents a bold attempt to shake the Philippine stock market from its prolonged slumber. Under the leadership of Chairman Francis Lim, the SEC is pursuing reforms that could finally address the structural problems that have kept our capital markets lagging behind regional peers.

The new proposal replaces the rigid 20% float requirement with a size-sensitive approach: 33% for companies valued at P500 million or below, 25% for those up to P1 billion, 20% for mid-caps up to P50 billion, 15% for large issuers between P50 billion and P150 billion, and just 12% for mega-capitalized companies above P150 billion.

Breaking Down Market Barriers

Chairman Lim's message is clear: the SEC will decide based on what benefits the market, not on who lobbies loudest. This principled stance comes at a crucial time when the Philippines consistently posts one of the lowest market-capitalization-to-GDP ratios among ASEAN members.

The old flat 20% rule created an impossible situation for large companies. A P300-billion company would have been forced to unload P60 billion worth of shares in a market where annual turnover often falls short of that single issuance. This practically guaranteed that major companies would avoid public listing altogether.

For smaller companies, however, the reform takes the opposite approach. Higher float requirements of 33% for micro-caps help prevent price manipulation and cornering schemes that have historically plagued this segment.

Balancing Growth and Governance

Critics raise valid concerns about the 12% float for mega-caps. In a market where shareholder activism remains weak and related-party transactions pose ongoing challenges, allowing controlling shareholders to retain 88% while accessing public capital could magnify governance risks.

However, this reform doesn't exist in isolation. The SEC under Lim has been modernizing the entire regulatory framework, implementing the Capital Markets Efficiency Promotion Act, refining REIT rules, and strengthening disclosure requirements.

The success of these reforms will depend heavily on enforcement. If the SEC rigorously applies peso-value floors and maintains strict governance standards, the tiered system could attract the kind of mega-cap listings that would transform index composition and draw global investor attention.

Regional Competition Reality

The Philippines faces intense competition from neighboring markets for listings and investment flows. Singapore, Thailand, and Malaysia have all modernized their capital market frameworks to attract large issuers. Our market's revival requires acknowledging this competitive reality while maintaining investor protection standards.

The tiered float framework represents a strategic wager that market expansion, not rigid orthodoxy, is what Philippine capital markets need most. It's a bet grounded in economic reality but not without risks.

Looking Ahead

The real test will come over the next 24 months. Will major companies finally choose to list locally? Will liquidity deepen across market segments? Will governance enforcement keep pace with the new flexibility?

For provinces and regions across the archipelago, a more vibrant capital market could mean better access to growth capital for local businesses and infrastructure projects. Rural enterprises that have traditionally relied on bank financing might find new pathways to expansion through public markets.

The revival of Philippine capital markets will require more than new float rules. But without removing these structural barriers, revival would remain impossible. Chairman Lim has initiated a rare moment of regulatory ambition in a market that desperately needs transformation.