Regulator approves DBP's use of alternative trading platform (BusinessWorld)

Regulator approves DBP's use of alternative trading platform

Jennee Grace U. Rubrico

December 24, 2004

The Securities and Exchange Commission (SEC) yesterday approved the use of an alternative trading system by the Development Bank of the Philippines (DBP) for the trading of receivables of small firms.
An SEC official said the approval for the alternative trading platform was approved by the commission en banc in a meeting yesterday.
Under the proposal, DBP will create a trading platform that would trade receivables of small and medium enterprises from big companies.
"It
was approved by the en banc in the meeting subject to certain submissions," the SEC official said. He said the DBP will have to submit to the SEC a final approval from the Monetary Board of the Bangko Sentral ng Pilipinas for the alternative system.
"The
approval is necessary because this involves a bank," he said. He said the Monetary Board had already issued a conditional approval for the alternative system "subject to documentation."
Under DBP's alternative trading system, small firms can sell their receivables from big companies after their validation.
DBP will sell these debts to a ready market, which will include banks, at prices which are lower than their actual value.
Allowing small business to sell their receivables will give them quick access to money or liquidity for operations and capital.
The receivables will be validated by companies that owe them.
Big companies effectively lend their reputation to their small suppliers and consequently raise their suppliers' chance of selling their collectibles.
Buyers of receivables can earn from the spread, purchasing collectibles at a discount and then redeeming them for full value when they fall due.
DBP, for its part, will earn from fees to be charged firms using its alternative trading system.
DBP plans to initially trade collectibles of small firms from San Miguel Corp. Eventually, the system will include receivables of other big companies that will lend small firms the reputation they need to get higher value for their collectibles.
DBP had earlier secured SEC's approval for the trading of receivables, allowing the bank to trade the collectibles in the alternative platform.
However, the actual receivables that will be traded will still have to be registered separately at the corporate watchdog.
DBP is looking at trading P1 billion worth of trade receivables in the first three years of operations.
Bank officials said they are hoping to operate the alternative platform by early next year.

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