SEC Chairman Francis Lim’s push to raise brokerage capital and stand up market-making standards addresses decades of market stagnation. But as veteran broker Vivian Yuchengco warns that a uniform P120-million threshold threatens smaller Filipino houses, regulators must balance systemic resilience with competitive access.
The Securities and Exchange Commission’s (SEC) drive to modernize the Philippine capital market has encountered organized resistance.
Veteran stockbroker Vivian Yuchengco, chair of the Philippine Association of Securities Brokers and Dealers (PASBDI), warns that the SEC’s proposed P120-million unimpaired paid-up capital (UPC) requirement could push smaller Filipino brokerage houses into forced consolidation or closure.
Though her warning carries economic weight, SEC Chairman Francis Lim’s regulatory rationale is compelling.
In an interview with Vantage Point, Yuchengco narrates that a firm operating at the current P30-million baseline would have to raise an additional P90 million—a fourfold increase. Yet the central question is whether preserving the industry’s historical headcount should take precedence over building robust safeguards for the investing public.
Philippine capital markets have drifted for decades in a low-liquidity trap, constrained by shallow trading depth, sluggish turnover, and governance structures that have shielded incumbents at the expense of dynamism.
Chairman Lim’s multi-pronged reform agenda—raising broker-dealer capitalization, placing term limits on long-tenured Philippine Stock Exchange (PSE) broker-directors, and introducing rigorous market-making rules—is not mere routine oversight. (READ: [Vantage Point] SEC’s float gambit: Shaking the stock market from deep slumber)
It is an urgent, necessary modernization drive designed to rebuild credibility, fortify market resilience, and turn the country’s moribund exchange into an engine for genuine capital formation.
Chairman Lim explains that modern brokerage operations require substantial financial stamina not just for trade execution, but for enterprise cybersecurity, regulatory compliance, risk management, and market development. Furthermore, decades of inflation have severely eroded the real purchasing power of historical capital baselines.
Crucially, two distinct initiatives must not be conflated. The general P120-million UPC rule is a draft proposal envisioned for phased rollout through 2030. By contrast, the P150-million threshold under SEC Memorandum Circular No. 28, Series of 2026, applies strictly to brokerages volunteering as designated market makers.
Because market makers continuously quote two-way prices, bridge supply-demand gaps, and hold securities on their own books, an elevated capital buffer is essential to withstand sharp volatility without sparking settlement contagion.
Counterarguments
Still, PASBDI’s newly released 10-page position paper, “Calibrated Capital, Credible Protection,” introduces salient counterarguments.
In a survey of 55 brokerage firms, PASBDI found that 54.5% (30 firms) oppose the uniform P120-million rule, with another eight backing it only with revisions. Among 36 respondents relying on the P30-million threshold, 25 voiced opposition; conversely, none of the five firms already holding P120 million or more objected. While the survey does not capture the entire industry, it confirms that resistance is concentrated among smaller-capitalized houses.
PASBDI’s most persuasive point centers on regulatory proportionality. Invoking Principle 30 of the International Organization of Securities Commissions (IOSCO), the association argues that prudential mandates should mirror the actual risks intermediaries assume.
It proposes a three-tiered capital framework, contending that a firm merely introducing clients to clearing brokers should not face the same regulatory burden as an institution carrying customer margin financing, holding custody of assets, or running heavy proprietary books.
This risk-based philosophy has merit. Yet smaller size does not automatically equate to lower risk. Even modest brokerages can inflict systemic reputational damage and catastrophic investor losses through deficient custody, lax internal controls, or operational misconduct. Any tiered model must never compromise the baseline safety of customer assets.
PASBDI also raises a valid operational objection to the proposed P20-million surety bond mandated for December 2028, ahead of the capital milestones in 2029 and 2030.
If underwriters require 100% collateral, the bond would immobilize liquid funds urgently needed for daily trading and settlement. A firm facing a P90-million equity call alongside a cash-collateralized P20-million bond would endure an effective P110-million immediate funding drain.
Consequently, PASBDI recommends stretching the glide path—proposing P60 million by 2029 and P90 million by 2032.
However, other association compromises prove less convincing. PASBDI suggests temporarily recognizing independently appraised increases in real estate owned by brokerages as regulatory capital.
Here, regulators must hold firm. Property valuations on paper cannot settle failed trades, satisfy immediate margin calls, or reimburse retail investors in a flash crash. Illiquid brick-and-mortar assets are no substitute for genuine, loss-absorbing liquidity.
Financial statements across the street underscore that capital size, profitability, and regulatory cushion must be evaluated separately.
Independent retail leader COL Financial held P1.78 billion in net liquid capital and an extraordinary 548.33% risk-based capital adequacy ratio (RBCA) as of June 2026.
Bank-backed BDO Securities absorbed a P189.71-million net loss in 2025, yet maintained P487.15 million in equity and P216.85 million in net liquid capital, remaining fully compliant.
First Metro Securities reported P169 million in paid-up capital, backed by documented operational experience running market-making for the First Metro ETF.
BPI Securities logged P202.36 million in capital despite an operating loss, while AB Capital posted P97.84 million in combined capital stock and APIC.
Meanwhile, traditional firms like David Go Securities—which closed 2025 with P42.45 million in unimpaired capital, P12.59 million in net profit, and a sound 199% RBCA ratio—prove that compliant, profitable houses could be locked out under a rigid, one-size-fits-all threshold.
PASBDI’s most constructive recommendation is for the SEC to publish a formal regulatory impact assessment detailing the risks addressed, the firms affected, and the competitive fallout. Doing so would fortify, not diminish, Lim’s authority.
As Chairman Lim told Vantage Point: “Our message is clear: market making must create real liquidity, not artificial activity; fair competition, not unfair advantage. The SEC’s rules require safeguards for conflicts of interest, transparent quotation standards, and accountable incentives. We want a market that is not only more active, but also fairer, more transparent, and worthy of investor trust.”
The same philosophy must anchor the broader capitalization reforms. Lim deserves strong support for tackling structural stagnation that has hobbled the exchange for decades.
The goal should not be to protect every legacy player regardless of capability, nor to arbitrarily purge viable independent firms. It is to forge an industry resilient enough to withstand shocks, expand market depth, and command public trust.
By taking legitimate proportionality concerns into account, the SEC can refine its timeline without diluting its mandate—ensuring that the investing public remains the ultimate beneficiary. – Rappler.com
Sources: PASBDI, Calibrated Capital, Credible Protection (October 2026); SEC draft amendments to Rules 28.1 and 33.1; SEC Memorandum Circular No. 28, Series of 2026; and audited brokerage financial statements filed with CMIC. Historical figures do not establish current SEC accreditation.
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