The Philippine Stock Exchange (PSE) is studying the feasibility of introducing equity derivatives or contracts for difference (CFDs) to tap into the vast market of Filipino overseas workers in line with efforts to further spur the growth of the capital market.
In a forum sponsored by the PSE Thursday, bourse president Francis Lim said he is hopeful that with the CFDs, the exchange can attract overseas-based Filipino investments.
With the assistance of MF Global Ltd., OFWs who are keen on investing in companies listed on the exchange will be given access to do so free of the difficulties often associated with investing outside of their own market.
MF Global Ltd., the leading broker of exchange-listed futures and options in the world, operates in 12 countries on more than 70 exchanges with an asset base of $4 billion and clients totalling 1.5 million.
Lim, however, said he has yet to take this matter up to the other members of the PSE board.
‘This is relatively a new concept. It is something that needs to be studied. I think it’s doable. Philippine stocks will not only be made available to OFWs but to foreign investors as well,’ he said.
CFDs were created in 1991 as an institutional trading and hedging instrument. CFDs are currently available in listed and/or over-the-counter markets in the United Kingdom, Germany, Switzerland, Italy, Singapore, South Africa, Australia, Canada, New Zealand and most recently Sweden. Some other securities markets, such as Hong Kong, have plans to issue CFDs in the near future. CFDs are not permitted in the United States, due to restrictions by the US Securities and Exchange Commission on OTC financial instruments.
OFWs remitted an estimated $13 billion last year, providing critical support to the economy. This does not include cash sent home through informal, non-bank channels.
According to estimates of the central bank, overseas Filipinos are expected to send back $14.7 billion in remittances this year.
‘If we could only tap a portion of this into the stock market, then that would be a further boost to our capital market,’ Lim said.