Law Summary

Introduction

This document outlines the revised rules and regulations governing futures trading in the Philippines, promulgated under the Revised Securities Act and Presidential Decree No. 902-A. It establishes definitions, registration requirements, and operational guidelines for futures exchanges, brokers, fund managers, and associated persons.

TITLE I: Definition of Terms

• Legal Principle: Defines key terms relevant to futures trading.
• Key Definitions:
  • Commission: Refers to the Securities and Exchange Commission (SEC).
  • Futures Exchange: Authorized entity for buying/selling futures contracts.
  • Futures Contract: Agreements for future delivery of commodities or cash settlement.
  • Commodity: Includes agricultural products, minerals, financial instruments, etc.
  • Futures Broker: Corporation engaged in soliciting orders for futures contracts.
  • Trading Advisor: Licensed individual advising on trading futures.
  • Fund Manager: Entity managing pooled investments in futures contracts.
• Important Requirements: Definitions establish the framework for compliance and operations in futures trading.

TITLE II: Futures Exchanges

• Legal Principle: Sets forth requirements for registration and licensing of futures exchanges.
• Key Requirements:
  • Compliance with minimum standards of self-regulation (e.g., business conduct rules, accounting systems).
  • At least 1/3 of the Board of Directors must be non-brokers.
  • Adequate facilities and transparency measures must be provided.
• Timeframes: Applications for licensing must include a hearing opportunity if denied.
• Penalties: Non-compliance can lead to suspension or revocation of the exchange's designation.

TITLE III: Clearing House

• Legal Principle: Details qualifications for clearing houses involved in futures trading.
• Key Requirements:
  • Must be an independent institution, preferably a reputable bank.
  • Ability to confirm transactions and specify margin requirements.

TITLE IV: Futures Association

• Legal Principle: Establishes criteria for the registration of futures associations.
• Key Requirements:
  • Rules must prevent fraud, promote fair trading, and allow disciplinary measures.
  • Membership eligibility is extended to licensed brokers and other designated individuals.

TITLE V: Futures Brokers, Fund Managers, and Trading Advisors

• Legal Principle: Outlines registration and licensing processes for futures brokers and associated persons.
• Key Requirements:
  • Brokers must register with the SEC, providing comprehensive information about their operations and principals.
  • A minimum paid-up capital of Php10,000,000.00 is required.
• Timeframes: Licenses must be renewed annually, and applications for new registrations must be publicly announced.
• Penalties: Violations can lead to revocation of registration or licensing.

TITLE VI: Locals

• Legal Principle: Defines requirements for individuals trading exclusively for their own accounts.
• Key Requirements:
  • Locals must pass an interview process and have a maximum trading limit.
  • They cannot manage client funds or engage in brokerage activities.

TITLE VII: Margin and Deposit Requirements

• Legal Principle: Establishes initial and ongoing margin requirements.
• Key Requirements:
  • An initial deposit of Php300,000.00 is required to open an account.
  • Brokers may impose higher margins than the SEC minimum.

TITLE VIII: Customers

• Legal Principle: Protects the rights of customers engaged in futures trading.
• Key Rights:
  • Right to rescind contracts under specific violations.
  • Access to fidelity funds in case of broker fraud.

TITLE IX: Prohibited Acts

• Legal Principle: Outlines unlawful activities in futures trading.
• Key Prohibitions:
  • Engaging in futures transactions without authorization.
  • Misrepresentation of membership or trading activities.

TITLE X: Futures Exchange Fees

• Legal Principle: Specifies filing and operational fees for futures exchanges.
• Key Details:
  • Annual fees based on trading volume and specific application fees.

TITLE XI: Effectivity

• Legal Principle: States the effective date of the rules.
• Key Detail: Rules take effect 15 days after publication in two newspapers of general circulation.

Key Takeaways

• The revised regulations establish a comprehensive framework for the futures trading industry in the Philippines, emphasizing transparency, customer protection, and stringent compliance requirements for all participants.
• Key players, including futures exchanges, brokers, fund managers, and trading advisors, are subject to rigorous registration and operational standards to ensure market integrity and protect investors.