Derivatives, Short-selling, Futures: Are Filipinos Ready?


While the PSE’s recent initiatives of developing derivatives, pushing ETF’s and endorsing short-selling are all good in terms of expanding the products and strategies in the market, I get the feeling that we are heading into a situation wherein we are trying to run before we can walk. Yes, derivatives, shorting and ETF’s are all components of a mature market but these efforts seem to overlook what is, for me, the most crucial factor: People.

Based on the PSE’s own figures, there were less than 600,000 accounts in 2012. Even at 20% annual growth, which would be a very generous rate, that would still put total accounts at below 1 million today. And keep in mind, those are ACCOUNTS, not people, so the number of actual people participating would likely be lower than that number. Furthermore, almost two-thirds of those accounts belong to people making less than 1M per year.

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What’s my point? Well, how many of those people REALLY understand the market? Based on the questions I see on a daily basis, the questions I get during seminars and the ones emailed to me, I can say that many STILL do not understand how the market works. Papasok sa market kasi “uso” or dahil “madali DAW kumita”. That’s a recipe for trouble. Of course, we should all be responsible for our own actions but I do believe REGULATORY bodies should install necessary safeguards to protect the investing public.

For example: I totally support short-selling. I believe it should be allowed. However, if you will allow short-selling, then people should be allowed to place “Cut-Loss” orders. That way, they can protect their capital. As it is, the current guidelines for short-selling prejudice retail accounts and, arguably, INCREASE their risks. Tapos, hindi ka pwede maglagay ng cut-loss. The good thing though is that bawal pa daw ang “Naked” shorting. And we still enforce the “Uptick” Rule. (Now, if you don’t know what those things mean, don’t you think you should find out? )

What to do instead? Two things actually. First, teach people about the market PROPERLY. This means developing a STANDARD presentation that ALL educators (like me) should use. That way, consistent ang intindi ng mga tao BAGO sila pumasok sa market. Hindi yung iba-iba paliwanag.

Second, instead of developing futures / shorting, why not encourage companies — especially good ones, to list. Sa to too lang, ilan lang ba ang matinong pagpipilian sa market? Companies like Shell Philippines. Better yet, with P-Noy recently allowing foreign banks to set-up shop here in the Philippines, why not REQUIRE listing sa PSE as one of the conditions for them to operate here? Since makikinabang naman sila at kikita sa ating mga Pinoy, hindi ba dapat lang na MAKINABANG din tayo sa kikitahin nila sa bansa natin?

Aya Laraya, Investment Advocate

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