The Securities and Exchange Commission (SEC) has adopted Memorandum Circular No. 28, Series of 2026, the SEC Rules on Market Making. The Rules set a framework for market making in equity and fixed income securities listed, traded or enrolled on an Exchange under the SEC's jurisdiction, covering who may act as a Market Maker, how securities are designated, the quoting and conduct obligations of Market Makers, Exchange incentives, risk management, surveillance and sanctions. The Circular was adopted on 15 October 2026 in Makati City. Government Securities covered by the Bureau of the Treasury's Primary Dealer and Government Securities Eligible Dealer framework are outside its scope unless and until the SEC, in coordination with the Bureau of the Treasury, expressly extends the Rules to them.

Key provisions

  • Who may be a Market Maker. Only Trading Participants of an SEC-licensed Exchange may act as Market Makers, upon accreditation or recognition by the relevant Exchange. A Market Maker must have unimpaired paid-up capital of at least PHP 150 million (or such higher amount as the SEC may prescribe, which the Exchange may calibrate subject to SEC approval), adequate operational capacity, no violation of any securities or commodities law or regulation found by a final and executory decision within the two years immediately preceding its application (taking into account the nature, gravity and currency of the violation and whether it has been fully resolved), and no administrative or judicial order that permanently restrains, prohibits, suspends or otherwise restricts its participation in any securities- or commodities-related business or activity. It must also appoint at least one Designated Specialist with at least three years of relevant experience or an equivalent qualification.
  • Notice to the SEC. The Exchange must notify the SEC of accredited or recognized Market Makers within three business days from the date of accreditation or recognition, and of any suspension, revocation or termination of accreditation within three business days from its finality or effectivity. It must also report to the SEC on accredited Market Makers at least quarterly, or at such other frequency as the SEC may require.
  • Designated Securities. The Exchange designates the securities for market making under criteria approved by the SEC; more than one Market Maker may be assigned to a security, and designations are subject to periodic review and de-designation.
  • Market Making Agreement. Each Market Maker must execute a Market Making Agreement approved by the Exchange, and the SEC must be notified within three business days of approval.
  • Conduct. Market Makers may trade for their own account in Designated Securities in line with the Exchange's implementing guidelines, engage in bona fide hedging, take part in block trades and other liquidity-enhancing mechanisms, perform stabilization functions subject to the Rules, and undertake other activities reasonably necessary for their market making functions as permitted by Exchange rules and applicable laws. They may not engage in wash sales, matched orders or fictitious transactions; create artificial prices or misleading market activity; misuse material non-public information obtained through their role as Market Maker; collude with issuers or other market participants to manipulate the price or trading activity of any security; or disseminate false or misleading information intended to influence the price of a Designated Security. Conflict-of-interest safeguards apply where a Market Maker performs several roles.
  • Quoting obligations. For equity securities, Market Makers must post and maintain firm two-sided quotes for a minimum prescribed duration, within maximum spreads and at minimum quote sizes set by tier, with the tiers reviewed at least annually. For fixed income securities, the Exchange determines whether quotes are firm, indicative or on a best-efforts basis.
  • Incentives. The Exchange must grant incentives to encourage the provision of liquidity and the effective performance of market making functions. Incentive programs require prior SEC approval, must reward quoting performance and liquidity provision, and must guard against excessive order cancellations, artificial trading activity and excessive inventory accumulation.
  • Records, risk and suspension. Records must be kept for at least five years. A Market Maker must notify the Exchange, and where required the SEC, of material risk events as soon as practicable and no later than one business day after discovery. A temporary suspension, modification or exemption of market making obligations must be reported to the SEC within one business day from approval and disclosed publicly.
  • Sanctions. Violations by a Market Maker of the Rules or the Exchange's implementing guidelines may lead to suspension or revocation of accreditation, administrative fines and penalties, or referral for civil or criminal prosecution. The Exchange may sanction a Market Maker only after notice and opportunity to be heard, and must promptly notify the SEC of material violations and sanctions.

Who is affected

Trading Participants of licensed Exchanges that act or wish to act as Market Makers, the Exchanges themselves, and issuers that have market making arrangements for their listed securities.

Effectivity and transition

The Circular takes effect fifteen (15) days after its complete publication in the Official Gazette or in at least two newspapers of national circulation. The Rules apply prospectively. Trading Participants already engaged in market making have six (6) months from effectivity to comply, including accreditation or recognition and the execution of a Market Making Agreement. The Exchange must submit its implementing guidelines to the SEC for approval within thirty (30) days from effectivity; existing Exchange market making rules continue to apply in the meantime to the extent not inconsistent with the Rules.

Practical takeaways

  • Existing Market Makers should map current arrangements against the Rules now; the six-month compliance window runs from effectivity.
  • Check capital and staffing early: PHP 150 million unimpaired paid-up capital and at least one qualified Designated Specialist.
  • Watch for the Exchange's implementing guidelines, which will fill in spreads, quote sizes, suspension indicators and incentive details.
  • Build record-keeping (five years) and risk-event reporting (no later than one business day after discovery) into compliance procedures.

Source: SEC Memorandum Circular No. 28, Series of 2026 (SEC Rules on Market Making), adopted 15 October 2026.

This alert was prepared by OS Law. This alert is for general information only and is not legal advice. Please consult counsel on how these rules apply to your specific circumstances.