The Philippine Stock Exchange (PSE) expects a decrease in the number of active stockbrokers as the Securities and Exchange Commission (SEC) plans to significantly raise the minimum capital requirement. SEC Chairman Francis Lim indicated that the capital requirement, currently as low as P30 million for some brokers, may be increased to over P100 million ($1.6 million), an amount last adjusted 25 years ago. Lim noted that many small-capitalized brokers have been associated with misconduct.
This proposed overhaul aims to strengthen investor confidence and deepen the Philippine capital market. The SEC's initiative is part of broader reforms, with Lim stating that brokers need sufficient capital for investor education and regulatory compliance. While the PSE had previously proposed a phased increase to P100 million by late 2029, the SEC's review suggests it could set an even higher bar. Some established brokers already voluntarily maintain capital between P300 million and P500 million, showing serious commitment to the business.
Lim did not provide a specific timetable for the capital requirement increase, emphasizing a careful approach to avoid legal challenges. The SEC's focus will next shift to boosting market liquidity, including reforms in market making. This move is anticipated to force smaller brokers to either raise fresh capital or consolidate, leading to a shakeout in the industry. As of March, there were 121 active trading participants in the Philippine Stock Exchange.
