Primary Market

Philippine government securities – Treasury Bonds and Bills are sold in the primary market in two ways:

Automated Debt Auction Processing Systems (ADAPS)

ADAPS is an electronic system allowing the National Government to sell securities to primary dealers (Government Securities Eligible Dealers, or GSEDs) lwhich are linked to the Bureau of the Treasury terminals. ADAPS tenders are either competitive or non-competitive.

Over-the-counter (OTC)

OTC transactions is another way which the Bureau of the Treasury sells government securities to specific investors. Participation to this transaction is limited to Government-Owned and Controlled Corporations, Local Government Units and Tax Exempt Institutions. Tendered bids through this system are non-competitive.

OTC transactions are done by Government-Owned and Controlled Corporations, Local Government Units and Tax-Exempt Institutions may tender over-the counter on a non-competitive basis.

Detailed descriptions of ADAPS and OTC platforms are at the web links below.

In March 2008, the Bureau of Treasury began the issue of Treasury bills and bonds through negotiated pricing, aside from public auctions. The yield and price for government securities sold through negotiation are to be based on current market values in the secondary market.

Secondary Market

Secondary trading of government and corporate debt securities is currently conducted over-the-counter (OTC) through duly licensed SEC brokers and dealers. With the full implementation of the OTC Rule, the Philippine Dealing and Exchange Corp (PDEx) became the sole operator of OTC transactions. Only its member brokers and dealers are allowed to engage in OTC transactions.

In March 2005, a Fixed Income Exchange (FIE) was established in the Philippines. The FIE is operated by the PDEx, which is tasked to operate and maintain the trading system for government securities and other debt instruments. The first stage of the FIE operation is to provide an electronic platform for inter-bank negotiated market for government securities. The second stage of the FIE operation will include corporate and retail investors wanting to course their trading transactions through the exchange.

PDEx market structure currently operates on two platforms based on bilateral limit system. The Negotiated Dealing Platform is primarily for the professional markets with relatively large trading transactions while the Auto Match Platform caters the public market (through broker participants) with smaller volume.

In February 2008, PDEx launched its Public Market trading platform where broking participants can post orders received from retail investors. With this new platform, retail investors are given equal access to the various fixed income securities listed on the trading board. PDEx is also set to launch its Multilateral Trading System which aims to improve access to the secondary market through the integration of the inter-Dealer, inter-Professional, and Public markets of PDEx. This platform will provide trading participants access as long as enough collateral is provided.

AsianBondsOnline’s How To Buy Bond section provides detailed procedure in buying and selling debt securities in the Philippines.