The Securities Regulation Code and its Implementing Rules and Regulations

Rule 32

2 Exchanges and Other Securities Trading Markets to be Supervised by Self-Regulatory Organization 32.2.1. No broker, dealer, salesman or associated person of a broker or dealer, singly or in concert with any other person, shall make, create or operate, or enable another to make, create or operate, any securities trading market, for the buying and selling of any security, unless such market participants are registered with the Commission. 32.2.2. No broker or dealer shall participate in any trading market unless he is a member of an SRO which has been registered with the Commission to regulate and supervise the activities of the broker or dealer in such market. 32.2.3. In case a broker or dealer is already a member of an existing SRO which is authorized to regulate and supervise a market other than the market in which a broker or dealer will participate, such broker or dealer may be allowed by the SRO to participate in such other market; Provided, that the broker or dealer shows proof and the existing SRO is able to demonstrate that such SRO is capable of performing its regulatory and supervisory obligations as regards to the activities of the broker or dealer in the other market; Provided further, that the SRO has committed in writing to regulate and supervise the broker or dealer with respect to such activities; Provided finally, that the SRO files an amendment to its current SRO registration to reflect its intention to act as SRO in such other market. 32.2.4. The Commission may prescribe the governance and ownership structure of an SRO or require amendment thereto to ensure the effective regulation and supervision of different markets. 33.1. Registration Requirements 33.1.1. An application for registration as an Exchange shall be filed on SEC Form 33 and be accompanied by the statements and exhibits prescribed to be filed under Section 33 of the Code; Provided, however, that an Exchange shall also apply for registration as a Self-Regulatory Organization under Section 40 of the Code at the time it files SEC Form 33-SRO. An application on SEC Form 33-SRO shall also be accompanied by the statements and exhibits prescribed under Section 40 of the Code. Any registered Exchange existing prior to the effectivity of these Rules shall, within forty-five (45) days from effectivity of these Rules, comply with all the requirements provided under this Rule, which were not provided for in its original registration. The following exhibits shall accompany the duly accomplished SEC Form 33-SRO: 33.1.1.1. Board Resolution attesting to particulars in the application. 33.1.1.2. Copies of identity cards/passports of directors and persons who control more than 10% of the applicant. 33.1.1.3. Copy of the Articles of Incorporation with all amendments thereto, and of existing By-Laws or instruments corresponding thereto, whatever the name, of the Exchange. The Articles must state that the purpose of the applicant/corporation is to engage in the business of an exchange. 33.1.1.4. Copy of proposed Exchange rules to be submitted for SEC approval pursuant to procedures set forth in Sections 33 and 40 of the Code. 33.1.1.5. Copy of the Articles of Incorporation with all amendments thereto, and of existing By-laws or rules or instruments corresponding thereto, whatever the name, of each affiliate and subsidiary listed in answer to Item 7 of the Statement. 33.1.1.6. Original signed copy of the applicant's audited balance sheet and statement of income and expenses, and all notes and schedules thereto as of the end of the last fiscal year. 33.1.1.7. Projected balance sheet and statement of income and expenses for the first five years in its capacity as an exchange. 33.1.1.8. A complete set of all forms pertaining to application for membership in the Exchange. 33.1.1.9. A complete set of all forms pertaining to application for approval as a person associated with a member of the Exchange (Such as associated persons and salesmen). 33.1.1.10. A complete set of all forms of financial statements, reports or questionnaires required of members, relating to such matters as members' responsibility or minimum capital requirements. 33.1.1.11. A complete set of documents, comprising the Exchange's listing applications, including the agreements required to be executed in connection therewith, and a schedule of listing fees. 33.1.1.12. List and explanation of all dues, fees and charges for exchange activities. 33.1.1.13. Study made as to comparative fees and charges imposed by other major and neighboring exchanges. 33.1.1.14. The organizational chart of the Exchange, indicating filled and unfilled positions and the identity of persons presently occupying the title or position. The chart should be accompanied by the list of qualifications/requirements and Statement of Duties and Responsibilities for each position/item. 33.1.1.15. List of present officers, governors, members of all standing committees, or persons performing functions similar to any of the foregoing, whatever their title or technical status may be, of the Exchange, who presently hold or have their offices or positions during the previous year, including for each: 33.1.1.15.1. Name; 33.1.1.15.2. Title; 33.1.1.15.3. Dates of commencement and termination of office or position; 33.1.1.15.4. Length of time each has held the same position or office; 33.1.1.15.5. Type of business in which each is primarily engaged. 33.1.1.16. List of present officers, directors, members of all standing committees or persons performing functions similar to any of the foregoing, whatever their title or technical status may be, of each affiliate and subsidiary listed in answer to Item 7 of the Statement, including for each Name and Title; 33.1.1.17. List of the names of participants and of current applications to become participants. 33.1.1.18. Complete set of all forms pertaining to identification and description of any qualifications or criteria that have the effect of denying or limiting access or use by any person, including a broker dealer and custodian participant or their clients, of the Exchange. If such data in the rules and procedures already, quote the specific provision(s). 33.1.1.19. Complete set of all forms pertaining to copies of proposed participation agreement/s. 33.1.1.20. Detailed plan of operation and economic justification for operating an Exchange with description and analysis of the industry and the market environment from which the Exchange expects to draw majority of its business, as well as the strategy for its ongoing operation. This should include the target security instruments (e.g., equities, bonds) and target participants (e.g., brokers, dealers). 33.1.1.21. Comprehensive Information Technology Plan, to include among others, list and brief description of the following: software and hardware to be primarily used in its exchange function and their location; back-up system or subsystem and their location; security system and procedures to be employed; procedures to check sufficiency of system's capacity and expansion program, if necessary; and IT system maintenance schedule. 33.1.1.22. Business Continuity and Disaster Recovery Plan. 33.1.1.23. Risk Management Manual and Internal Control Procedures. 33.1.1.24. Insurance plan to cover any operational risks and other risks, to be specified by type, total amount and risk area. 33.1.1.25. Copies of service contracts/proposed contract of any activities or services to be outsourced, if any. 33.1.1.26. The following undertakings executed by the President of the Exchange: 33.1.1.26.1. That the Exchange will comply and enforce compliance by its members with the provisions of the Code, its implementing rules and regulations and any amendments to these, the rules of the Exchange, and as with any terms and conditions imposed by the Commission in connection with registration of the applicant; 33.1.1.26.2. Undertaking to subject the information technology, trading, business continuity and disaster recovery plans, and risk management systems to regular review and audit by an independent firm at least once every three (3) years and such other frequency that the Commission may deem necessary. The results of such review and audit shall be submitted to the Commission within thirty (30) days from completion of the audit. 33.1.1.26.3. That in the event a member firm becomes insolvent or when the Exchange/SRO shall have found that the financial condition of its member form has so deteriorated that it cannot readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds, the Exchange/SRO shall, upon order of the SEC, take over the operation of the insolvent member firm and immediately proceed to settle such firm's liabilities to its customers. 33.1.1.26.4. Statement of Readiness and Undertaking to link the proposed system with other capital market participants, within and outside of the Philippines. 33.1.1.27. Brief description as to any judicial or any other legal, including arbitration, proceedings, pending or terminated within the last five (5) years or affecting the applicant directly or to which any of its properties or assets, directors, or officers. 33.2. An amendment to such application shall be made in duplicate on SEC Form 33-A, and each amendment shall be dated and numbered in the order of filing. 33.3. No later than seven (7) days after the discovery that any information in the statement, any exhibit, or any amendment was inaccurate when filed, an Exchange shall file with the Commission an amendment correcting such inaccuracy. 33.4. Whenever the number of changes to be reported in an amendment, or the number of amendments filed, are so great that the purpose or clarity of the disclosure will be promoted by the filing of a new complete statement and exhibits, an Exchange may, at its election, or shall, upon request of the Commission, file as an amendment a completely new statement together with all exhibits which are prescribed to be filed in connection with SEC Form 33. 33.5. Nothing in this Rule shall be construed as precluding the Commission from requiring an applicant for registration or a registered Exchange to submit other requirements it may deem reasonably necessary to effectively regulate and supervise the Exchange and/or to protect the interest of the investing public. 33.6. Within ninety (90) days after the filing of the application the Commission may issue an order either granting or denying registration as an Exchange, unless the Exchange applying for registration shall withdraw its application or shall consent to the Commission's deferring action on its application for a stated longer period after the date of filing. The filing with the Commission of an application for registration by an Exchange shall be deemed to have taken place upon the receipt thereof. Amendments to an application may be made upon such terms as the Commission may prescribe. 33.7. Upon the registration of an Exchange, it shall pay a fee in such amount and within such period as the Commission may fix. 33.8. Upon appropriate application in accordance with the rules and regulations of the Commission and upon such terms as the Commission may deem necessary for the protection of investors, an Exchange may withdraw its registration or suspend its operations or resume the same.

Rule 32

1 Trading Limited to Listed Securities and Exchanges Registered under the Code No Broker Dealer or any registered person shall effect any transaction in any security in an Exchange or any other trading market, unless such Exchange or any other trading market and the securities listed or allowed to be traded therein are registered under the Code or exempt from registration pursuant to Sections 9 and 10 of the Code.