South Korea, Indonesia and the Philippines look to strengthen access to securities lending and short selling, according to panellists at the Pan Asia Securities Lending Association (PASLA) conference.
Market participants discussed key market developments and challenges across the APAC region over the past 12 months in the PASLA APAC Market Updates session.
Over the course of 2024, the PASLA ASEAN working group aims to advance in its goal to release a securities lending and short selling programme in the Philippines.
According to Ed Oliver, managing director for product development at eSecLending, the PASLA working group is engaged with the Philippines Stock Exchange to understand the rule changes in the region following the introduction of a new regulatory framework on securities lending and short selling at the end of 2023.
In 2015, the ASEAN working group commenced its first workshop with the region’s stock exchange to work through a number of barriers facing institutions that wanted to lend securities and to introduce short selling.
“There were two hurdles in the region that the Association’s working group had worked on for a long period of time," Oliver said. “The first hurdle was getting the Philippine regulators to accept the internationally regulated Global Masters Securities Lending Agreement (GMSLA). The second barrier was getting the market to accept offshore collateral and being able to lend securities.”
The new rules and regulations introduced last year addressed some of these challenges.
In Indonesia, Oliver said the ASEAN working group had been working alongside central counterparty ID Clear on the expansion of the entity’s securities lending solution.
He added: “We hope we are able to provide more opportunities in 2024 for institutions to lend securities for the first time. The final hurdle in achieving this is getting the region’s regulator’s to accept offshore collateral.
“As a working group we have explained how offshore collateral works and how triparty engagement plays a role in this. Currently, we are facing stepping stones, but we are getting closer to an end solution for Indonesia.”
In South Korea, a short selling ban marked an “intense period of engagement” between market participants and onshore agencies, according to Jeff Coyle, PASLA board member and head of Hong Kong agency trading, securities finance at Northern Trust.
During Q4 2022 and Q1 2023, there were a number of positive announcements on developments and the strengthening of the capital markets in South Korea.
This included the reduction of the securities transaction tax, the removal of tax on treasury bonds, as well as the removal of the “cumbersome” investor registration scheme. Coyle said this “fed into the optimism” in South Korea around the securities lending landscape.
However, in 2023, the region faced further regulatory scrutiny and regulatory punishments over short sell violations.
Coyle indicated that this led to an outright ban on short selling on 6 November 2023, which is due to remain in place until the end of June 2024. Coyle said regulators were working to improve rules and systems.
