End of an era | Philstar.com
The Philippine Stock Exchange (PSE) will permanently close its trading floor. This can be a sentimental moment for many long-time brokers given the rich history of PSE. As the exchange transitions to “floorless trading,” we look back at the origin of the PSE and the unique history of its trading floors.
One of the oldest stock exchanges in Asia
The PSE was formed on December 23, 1992 as a result of the unification of the country’s two oldest stock exchanges. The Manila Stock Exchange was established on August 8, 1927 and was one of the oldest stock exchanges in Asia. The Makati Stock Exchange was incorporated on May 27, 1963. Indeed, the PSE celebrates its 95th anniversary this year.
Manila vs. Makati
A fierce rivalry ensued between the Manila and Makati exchanges upon the creation of the latter. The country had two different stock exchanges trading the same stocks. Both exchanges had their own set of administrators, as well as their own given offices and trading floors. Prior to the merger, both exchanges already had their own trading systems. However, even after the merger, the Manila and Makati factions continued to battle for control of the unified exchange. Arguments have arisen regarding the naming of buildings, the designation of official headquarters, and the trading system to be used.
Long road to unification
The formation of the PES was the result of the forced marriage in 1992 forced by President Fidel Ramos. The merger of the Manila and Makati stock exchanges was one of the conditions for granting an Asian Development Bank (AfDB) loan to the country. The Tektite and Ayala trading rooms were electronically linked in 1994. On February 19, 2018, stockbrokers from Ortigas and Makati all moved to their new home in the PSE Tower at BGC (see Finally, United in One House , February 19, 2018). Still, there were arguments as to which trade bell to use, so the PES decided to keep the Manila and Makati trade bells (see Why are there two bells?, July 2, 2018). Before the pandemic hit, 86 of the 117 active brokers had a trading booth in the PSE Tower trading room.
Trading before computers
Before trading was computerized, the outcry system was used. Brokers rushed to the blackboard to shout their orders. Authorized traders, who were in yellow vests, marked these orders on the trading board with chalk. The men on the council counted the total orders. The page boys wore red vests and walked around the trade stands to get the trade contracts signed. The telephone operators wore blue vests. Later the vests were changed to colored badges to properly identify trade personnel.
Get radio stock quotes
In the 1970s and 1980s, there was no television or live news. Instead, market aficionados were glued to their radios listening to market updates. Radio announcers provided the latest stock price quotes and market movements. Investors should then call their brokers to place their orders. With the advent of cable television, AM radio was supplemented and eventually replaced by business channels and stock market programs that carried a live ticker and updated stock quotes.
Retail is accelerating during the pandemic
The rise of online commerce during the pandemic has been a global phenomenon. Stay-at-home orders have kept people locked up and inactive inside their homes, prompting many to try stock trading. The explosive growth in retail also gave rise to Robinhood traders who were aggressive, mostly millennial traders focusing on dynamic games and high-flying stocks (see Robinhood traders, June 22, 2020) .
Our country has seen a noticeable increase in online commerce during the pandemic. According to the PSE, online accounts increased by 24% year-on-year to reach 1.1 million in 2021, accounting for 72% of total exchange accounts. This coincides with growing local participation in the stock market. Since 2020, local exchanges have accounted for 58% of the total market value traded, up from the average contribution of 48% from 2015 to 2019.
WFH configuration supports e-commerce
At the height of the pandemic and the confinements, the PSE had to close its trading room. Brokers used a work from home (WFH) setup to be able to continue trading and serving their clients. Much improved internet connections and advancements in technology have supported this type of business setup. Online investors no longer need to call their brokers to place an order, and brokers do not need to be in the trading room to execute trades. Most of the trading volume is now generated outside the trading floor.
embrace the future
Long-time traders and brokers are feeling sad and nostalgic because of the announcement of the definitive closure of the trading floor. History was written there and investors will fondly remember its role in the evolution of our stock market. Many friendships and businesses have been forged in the trading rooms.
Social distancing during the pandemic, coupled with the convenience offered by technology, has accelerated the rise of online commerce. Investors now have direct market access through their own trading platforms or terminals. The computerization of trading has given rise to algorithmic and high-frequency trading used by hedge funds and asset managers. These trends marked the end of the trading floor era and supported the PSE’s migration to a floorless trading setup.
The rich history of the PES is preserved in the PES Museum. It contains old trading paraphernalia such as blackboards, trading booths, trading contracts, time stamps, and stock market seals and flags. The PSE Museum also features photos of the old buildings and trading halls of Manila and Makati Stock Exchange.
Philequity Management is the fund manager of the leading mutual funds in the Philippines. Visit www.philequity.net to learn more about Philequity managed funds or to view previous articles. For inquiries or to send feedback, please call (02) 8250-8700 or email [email protected].