MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) is set to unveil a new set of regulations covering the over-the-counter derivatives market as part of the country’s continuing foreign exchange liberalization program
BSP officer-in-charge Nestor Espenilla Jr. said authorities are improving the existing regulation to take into consideration recent developments including the volatile global markets.
“We have an existing one we are improving it so we will be unveiling that soon enough and that would also incorporate some of the reforms of the OTC derivatives market particularly currency,” he said.
Derivatives are financial instruments that primarily derive its value from the performance of an underlying variable such as interest rates, foreign exchange rates, or financial instrument prices.
Market participants enter into a derivatives transaction for several economic purposes such as hedging, managing capital or funding costs, and yield enhancement, among others.
Espenilla said there is a need to protect the interest of investors amid the volatile global markets caused by the impending interest rate hike in the US, as well as developments in the country.
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“Equal for business and individuals to manage their risks to derivative products have a role to play for risk management so that is why we are currently working with our derivatives framework,” he said.
Espenilla said the BSP is looking at deploying the revised guidelines within the year.
“We want to deploy it this year. Although there are processes, the regulations are almost done so there will be an exclusion period and internal policies,” he said.
Espenilla said uncertainties have affected both the equities and foreign exchange markets in the country despite the strong macroeconomic fundamentals.
“Of course also the global environment is volatile, that is inherent in the financial system since we are an open small economy and we run an independent monetary policy targeted on inflation. Naturally exchange rates have some volatility but our fundamentals are strong so the volatility is controlled,” he said.
