Omnibus Revised Rules and Regulations Implementing R.A. No. 245

June 15, 2010 DOF DEPARTMENT ORDER NO. 020-10 OMNIBUS REVISED RULES AND REGULATIONS IMPLEMENTING R.A. NO. 245, AS AMENDED, AND R.A. NO. 1000, AS AMENDED, IN RELATION TO R.A. NO. 7653 1. Legal Basis: 1.1 This Order is issued pursuant to Republic Act No. 245, as amended, and Republic Act No. 1000, as amended, in relation to Republic Act No. 7653 to prescribe the omnibus revised rules and regulations on the issuance, placement, recording, selling, servicing, redemption and payment of Government Securities issued by the Republic of the Philippines. 1.2 The Secretary of Finance is mandated under Republic Act No. 245 to prepare and issue such rules, regulations, and instructions as he considers necessary for the successful achievement of the purposes of meeting public expenditures authorized by law or providing for the purchase, redemption, or refunding of any obligations, either direct or guaranteed, of the Philippine Government, taking such measures as he may deem necessary to protect the Republic of the Philippines and the investing public from fraud or loss. 1.3 The Secretary of Finance is authorized to prescribe the form or forms, the interest and discount rates, the denominations, maturities, negotiability, convertibility, call and redemption features, and all other terms and conditions of issuance, placement, recording, sale, servicing, redemption, and payment of all evidences of indebtedness issued under the authority of Republic Act Nos. 245 and 1000. 2. Purposes: 2.1 To provide a liquid and organized environment for Government Securities issued by the Republic and make the same more attractive to investors thereby enhancing the capability of the Republic to raise needed funds from public borrowings to achieve the purposes set forth in Republic Act Nos. 245 and 1000. 2.2 To allow various participants in the Government Securities market to trade, transfer, or encumber in and among themselves despite differences in their tax status in due consideration of the innovations of technology which now enable the tracking of beneficial ownership and the development of a legal framework that recognizes electronic evidence of recording beneficial ownership. 2.3 To establish an orderly environment and appropriate oversight over the secondary market for Government Securities consistent with relevant laws, rules and regulations which now require the existence of organized secondary markets under the regulatory oversight of the Securities and Exchange Commission, even for securities which are exempt under the Securities Regulation Code, such as Government Securities, to protect the Republic of the Philippines and the investing public from fraud or loss. CDAHIT 2.4 To establish the minimum standards for secondary markets of Government Securities to ensure that all investors of Government Securities enjoy equal benefits regardless of market venue. In accordance with Republic Act No. 245, as amended, and Republic Act No. 1000, as amended, in relation to Sections 117, 118, 119, 120, 121, 122, and 129 of Republic Act No. 7653, the following Omnibus Revised Rules and Regulations governing the Issuance, Placement, Sale, Servicing and Redemption of Government Securities issued by the Republic of the Philippines are hereby adopted: ARTICLE I General Provisions PART 1 Definition of Terms SECTION 1. Definition of Terms. When used in this Order, the terms below shall have the following meaning: 1. "Auction Method" is a method of sale or origination of Government Securities whereby prospective buyers accredited by BTr submit tenders or bids through the Auction System. 2. "Auction System" means an auction system used by BTr for the primary or origination sale of Government Securities through an Auction Method. Unless the context otherwise requires, the term Auction System shall include ADAPS or such other BTr-accredited auction system. 3. "Automated Debt Auction Processing System" or "ADAPS" means the electronic auction system that accepts and processes bids for auction of Government Securities. 4. "Brokers" are institutions licensed as such by the SEC in respect of Government Securities. 5. "BSP" shall refer to the Bangko Sentral ng Pilipinas, or its successor agency. 6. "BTr" means BTr or National Treasury, or its successor agency. 7. "BTr-Managed Funds" shall refer to funds managed by BTr pursuant to law or contract. 8. "Competitive Bid or Tender" means a bid or tender to purchase a stated par amount of securities at a specified yield or rate. CAcIES 9. "Dealers" are financial institutions licensed as such by the SEC in respect of Government Securities. 10. "Dutch or Single Price Auction" means an auction in which all successful bidders pay the same price regardless of the bid yields or rates that each of them submits. 11. "English or Multi-Price Auction" means an auction in which each successful competitive bidder pays the price equivalent to the bid yield or rate that each of them submits. 12. "Financial Institution" shall mean corporations organized as such primarily to deal in financial assets through borrowing funds from savers or investors and lending funds to users, producers and other financial institutions. This may refer to banks, non-bank financial intermediaries, insurance companies, securities dealers or brokers, investment houses, finance companies and mutual funds under the appropriate regulatory requirements of Bangko Sentral ng Pilipinas, the Securities and Exchange Commission, or the Insurance Commission. 13. "Government-Owned or Controlled Corporation" shall refer to a corporation which is created by special law or organized under the Corporation Code in which the Government, directly or indirectly, has ownership of the majority of the capital or has voting control. 14. "Government Securities" for purposes of this Department Order shall mean securities issued by the Republic of the Philippines and includes Treasury bills, certificate of indebtedness, Treasury bonds, notes, securities, and other evidence of indebtedness. 15. "Government Securities Eligible Dealer" or "GSED" means a SEC-licensed dealer in Government Securities accredited by BTr to participate in the primary or origination sale of Government Securities. 16. "Government Securities Trading Market" or "GSTM" shall refer to an SEC-authorized trading market accredited by BTr under this Order as a secondary market for Government Securities. 17. "Local Government Unit" shall refer to a political subdivision of the Republic of the Philippines consisting of provinces, cities, municipalities, or autonomous regional political subdivision authorized by law to issue bonds or incur indebtedness. 18. "Market Maker" means a GSED accredited by BTr who commits to provide firm two-way quotes in Government Securities in accordance with the relevant BTr rules and regulations. AaSHED 19. "Non-Competitive Bid or Tender" means a bid or tender to purchase a stated par amount of securities at the weighted average interest rate resulting from the accepted Competitive Bid or Tender. 20. "Over-the-Counter Method" is a manner of primary origination or sale of Government Securities through offer or negotiation to entities as may be allowed by BTr such as but not limited to Government-Owned or Controlled Corporations (GOCCs), Local Government Units (LGUs), or Tax-Exempt Institutions (TEIs). 21. "Primary Securities Account" shall refer to the securities account in RoSS maintained by a participant. 22. "Registry of Scripless Securities" or "RoSS" means the electronic registry, which serves as the official and final record of ownership or interest in Government Securities. Unless the context otherwise requires, the term RoSS shall include any BTr-accredited electronic sub-registry. 23. "SEC" shall refer to the Securities and Exchange Commission of the Philippines, or its successor agency. 24. "Settlement Bank" shall refer to BSP or to a bank or non-bank financial institution designated by a bondholder for any settlement of primary market purchases, receipt of coupon and/or redemption payments of Government Securities. The Settlement Bank must be a member of the applicable payment system such as BSP Philippine Payment and Settlement System (PhilPaSS) or Philippine Domestic Dollar Transfer System (PDDTS). 25. "Tax-Exempt Institution" shall refer to an entity declared and certified by the Bureau of Internal Revenue as exempt from the applicable tax under the National Internal Revenue Code. 26. "Tap Method" means a manner of sale or offering of Government Securities open exclusively to GSEDs qualifying as Market Makers, BTr-Managed Funds, and other entities or instrumentalities as may be allowed by the Secretary of Finance or through BTr. PART 2 Powers of the Secretary of Finance SECTION 2. Authority to Borrow. Under Section 1 of R.A. No. 245, as amended, the Secretary of Finance, with the approval of the President of the Philippines, and after consultation with the Monetary Board, is authorized to borrow from time to time on the credit of the Republic of the Philippines such sum(s) as in his judgment may be necessary to meet public expenditures authorized by law or to provide for the purchase, redemption or refunding of any obligation, either direct or guaranteed, of the Philippine Government, and to issue thereof evidence of indebtedness which may be made payable in Philippine currency, or in any readily convertible foreign currency. DCHaTc Under Section 1 of R.A. No. 1000, as amended, upon the recommendation of the Secretary of Finance, the Monetary Board, and the National Economic and Development Authority, the President of the Philippines is authorized to issue, preferably in the Philippines, or abroad if necessary, in the name and in behalf of the Republic of the Philippines bonds, including lottery bonds, to finance public work and projects for economic and social development which have high economic or social rates of returns and which are authorized by law, including expropriation of lands for subdivision and resale to individuals, or to repay or service bonded obligations of the Government incurred for such projects. The bonds issued under the authority of this section may be made payable both as to principal and interest, in Philippine currency or any readily convertible foreign currency. SECTION 3. Issuance of Government Securities. The exercise of authority to borrow by the President of the Philippines or the Secretary of Finance shall be through the issue of Government Securities, and shall be undertaken by an Auction Committee hereinafter constituted whenever auction is prescribed and by BTr whenever any other method is authorized. SECTION 4. Authority of the Secretary of Finance to Prescribe the Features of Government Securities. The Secretary of Finance, in consultation with the Monetary Board, shall prescribe the terms, yields, denominations, maturities, negotiability, convertibility, call, eligibility, redemption and other features of the Government Securities, including documentary stamps tax on the original issue and final withholding tax on the income derived from Government Securities. Other terms and conditions of Government Securities issued pursuant to this Order shall be subject to the provisions of R.A. Nos. 245 and 1000, as applicable. SECTION 5. Authority of the Secretary of Finance to Prescribe Standards on Secondary Market of Government Securities. The Secretary of Finance, through BTr, shall determine the appropriate secondary market structure for Government Securities, in accordance with relevant laws and regulations, as well as require the implementation, through BTr, of an accreditation framework for GSTMs and its participants and provide the necessary environment to ensure the liquidity of the issues and the development of the investor base. PART 3 Classification, Features, Pricing, and Redemption of Government Securities SECTION 6. Classification of Government Securities. (1) Government Securities issued pursuant to R.A. No. 245, as amended are classified as follows: a. Treasury bills issued on a discount basis or at par and payable at maturity without interest. Treasury bills may be offered for sale either on a competitive basis or at a fixed rate of discount or at par and may be made payable at any date not later than one year from the date of issue; b. Certificate of indebtedness having maturities not exceeding eighteen months from the date of issue; and TAIcaD c. Treasury bonds, notes, securities or other evidences of indebtedness having maturities of one year or more but not exceeding twenty-five years from the date of issue. (2) Government Securities issued pursuant to R.A. No. 1000, as amended. (3) Cash management bills and other evidences of indebtedness not falling under Paragraphs (1) and (2) above, issued by the Republic of the Philippines. SECTION 7. Pricing of Government Securities; Frequency of Payment. Government Securities may be issued at a discount basis, at a premium, or at par and payable with or without coupon in accordance with the terms and conditions of issuance under a Notice of Offering or public notice issued by the Secretary of Finance through BTr. Coupons due on coupon-bearing Government Securities shall be payable semi-annually in arrears calculated on 30/360-days unless otherwise prescribed in the terms and conditions of issuance under a Notice of Offering or public notice issued by BTr. SECTION 8. Denomination and Exchange. (1) Government Securities issued in scripless form may be transacted in any face amount, subject to such requirements as the BTr may prescribe. (2) Government Securities issued in certificated form shall be in denominations of P10,000.00, P50,000.00, P100,000.00, P500,000.00, P1,000,000.00, P5,000,000.00 and P10,000,000.00 unless otherwise prescribed in the terms and conditions of issuance under a Notice of Offering or public notice issued by BTr. Exchanges of Government Securities from higher to lower and/or lower to higher denominations of identical issue and series may be effected at BTr. SECTION 9. Servicing and Redemption. Government Securities issued by the Republic of the Philippines pursuant to R.A. Nos. 245 and 1000 as implemented by this Order may be exchanged at any time before maturity, or redeemed at or after maturity. Coupon and redemption payments due on Government Securities shall be made by the Republic of the Philippines, through BTr, to the person whose name appears in RoSS as registered owner of the Government Securities. SECTION 10. Taxation. (1) The income derived from Government Securities issued pursuant to R.A. No. 245, as amended, shall be subject to the applicable final tax rate under the National Internal Revenue Code in force at the time of issue and the rules and regulations issued by the Bureau of Internal Revenue (BIR), to be withheld on discounts valued at the time of issue on every original sale which shall be deducted by the buyer from the discounts of the Government Securities and included in the remittance of the purchase price. Periodic coupon payments on Government Securities shall be subject to the applicable final tax to be withheld at the time the coupon payments are made. DCTSEA (2) Government Securities issued pursuant to R.A. No. 1000, as amended, shall not be subject to taxation. (3) The documentary stamp tax on the original issue of Government Securities under R.A. No. 245 shall be for the account of the issuer. (4) No other taxes shall be collected on subsequent trading of the securities which have been subjected to tax under the first paragraph herein. (5) Taxation of Government Securities transactions conducted under SEC-approved borrowing and lending programs of accredited GSTMs shall be governed by rules, regulations and issuances of the Bureau of Internal Revenue. (6) Taxation of repurchase agreements covering Government Securities conducted under relevant SEC-approved programs of accredited GSTMs and which provide for transfer of title over Government Securities subject of the repurchase agreement, shall be deemed to be covered by the exemption from documentary stamp tax under the relevant provisions of the Documentary Stamp Tax Law. PART 4 Form and Registry of Government Securities SECTION 11. Form of Government Securities. Government Securities issued pursuant to R.A. Nos. 245 and 1000 shall be issued in scripless form unless a physical certificate is otherwise prescribed by the Secretary of Finance through BTr. SECTION 12. Registry of Government Securities. Government Securities issued by the Republic of the Philippines pursuant to R.A. Nos. 245 and 1000, as well as all subsequent transfers of such Government Securities, shall be recorded in the RoSS. BTr shall issue such rules, regulations, and procedures for the operation of the RoSS as it deems necessary, desirable and appropriate for the proper performance of its registry function. SECTION 13. Sub-Registrar and Sub-Registry Records. The BTr may engage a Sub-Registrar which shall maintain the books and records of specific set of accountholders and their transactions. (a) Qualifications of a Sub-Registrar: i. The Sub-Registrar must be a duly licensed entity under the jurisdiction of the BSP and/or the SEC and authorized to perform registry functions; ii. The Sub-Registrar must have the capability to service a tax unification program for trading and settlement of Government Securities in a manner acceptable to BTr, pursuant to this Order; (b) Duties of a Sub-Registrar. The Sub-Registrar shall perform the following duties: aSTHDc i. It shall maintain an electronic sub-registry book, which shall contain all records of transfers of ownership; ii. It shall electronically interface with a BTr-accredited GSTM that provides services relative to clearing and/or settlement processes; iii. It shall perform such other duties as may be prescribed or required by BTr for the efficient and effective recording of transactions on Government Securities. (c) The Sub-Registry records shall form part of the official records of RoSS. SECTION 14. Recording of Transfers. Government Securities may be validly transferred by making appropriate entries in RoSS. Such transfers shall have the effect of legal delivery of such Government Securities. SECTION 15. Finality of Transfer Through RoSS. Records of transfers of Government Securities through entries in RoSS shall be binding on the parties to the transfer, and shall be final, conclusive and irrevocable. The procedure by which, and the exact time at which such entries are created shall be governed by the rules of RoSS as prescribed by BTr. SECTION 16. Pledge of Government Securities. A pledge of Government Securities which have been transferred through entries in RoSS shall be constituted, and shall accordingly be considered delivered, in accordance with Articles 2093 and 2095 of the Civil Code (RA No. 386) when RoSS certifies by an appropriate entry that the Government Securities have been segregated and/or earmarked in favor of the pledgee. SECTION 17. Involuntary Liens and Encumbrances on Government Securities Recorded in RoSS. Involuntary liens, garnishment, attachment, execution, or other legal processes against Government Securities recorded in RoSS shall comply with the provisions of the Rules of Court promulgated by the Supreme Court of the Philippines subject to R.A. Nos. 245 and 1000 prescribing limitation on garnishment or execution on Government Securities. ARTICLE II Primary Market of Government Securities SECTION 18. Methods of Origination. The following are the recognized methods of issuing Government Securities: (a) Auction Method (b) Over-the-Counter Method, and (c) Tap Method. The Secretary of Finance through BTr may prescribe such other methods of origination in issuing Government Securities. PART 1 Auction Method SECTION 19. Auction Process. Auctions of Government Securities may be conducted under a Dutch or Single Price Auction, English or Multi-Price Auction, or such other auction process as announced by BTr. DAEIHT SECTION 20. Participants in Auction of Government Securities. (1) Any financial institution may be accredited to participate as an accredited GSED in the primary origination or auction of Government Securities in accordance with the requirements of BTr. Except as may otherwise be prescribed by BTr, an accredited GSED or financial institution shall meet the following criteria: (a) Unimpaired capital and surplus account at any one time as prescribed by BSP, the SEC, or the Insurance Commission. For purposes of this Order, the term "unimpaired capital and surplus" shall mean the combined capital accounts of a financial institution and refer to its unimpaired paid-in capital and earned surplus. The term "surplus" shall refer to the excess of the assets over the liabilities and paid-in capital of the financial institution, but excluding the reserves set aside for valuation purposes, and reserves for liabilities and deferred income tax, and other capital adjustments; (b) Certification by BSP, SEC, or Insurance Commission as to compliance with Paragraph (a) above including a certification that the financial institution is in good standing; and (c) For purposes of participating in the primary origination or sale of Government Securities, such Financial Institution shall have a deposit account with a Settlement Bank, where the settlement of the award may be debited. (d) Necessary interface, electronic or otherwise, to effect participation in the methods of origination and settlement of Government Securities as prescribed by BTr. Accredited GSEDs may participate in competitive and non-competitive auction. (2) Persons other than accredited GSEDs may be allowed to participate in the Auction on a non-competitive basis in accordance with the rules and regulations that will be issued by BTr. SECTION 21. Public Notice of Offering. The Secretary of Finance through BTr may, from time to time, by public notice offer Government Securities for sale and invite tenders therefor. All tenders or bids for Government Securities of accredited buyers shall be transmitted through the Auction System. The Government Securities so offered, and tenders received shall be subject to the terms and conditions imposed under this Order, except as they may be modified by the Secretary of Finance, in consultation with the Monetary Board, which shall be made part of the public notice of offering. The public notice of offering shall be transmitted electronically to accredited buyers through an Auction System and/or by any other method as may be prescribed by BTr and shall indicate such information as may be deemed appropriate by the Secretary of Finance through BTr. IAEcCT In cases where the announced auction cannot be conducted due to a declared holiday or suspension of work or banking day, or fortuitous event, the auction for Government Securities shall automatically adjust to the next succeeding business day or as may be announced by the BTr. SECTION 22. Submission of Bids or Tenders. Unless otherwise prescribed by the Secretary of Finance through BTr, bids or tenders in response to a public notice of offering of Government Securities shall be transmitted to BTr through the Auction System. In case of system failure, power outages or as may be prescribed by the Secretary of Finance through BTr, tenders for purchase of Government Securities shall be submitted in official tender forms required by BTr before the prescribed cut-off time for receiving tenders for manual entry to the Auction System. Each tender shall be unconditional and shall be for a minimum nominal amount of P10.0 million and in multiples of P1.0 million thereafter, unless otherwise prescribed by the Secretary of Finance through BTr. Unless otherwise provided in the public notice of offering, yields of submitted tenders for Government Securities shall be stated in three (3) decimal places. SECTION 23. Receipt and Processing of Tenders. Tenders for Government Securities electronically transmitted by accredited buyers through the Auction System prior to the cut-off time fixed for the receipt of tenders shall automatically be acknowledged by BTr through the Auction System. In case of any downtime of the Auction System, tenders for Government Securities shall be submitted in the prescribed tender form within the prescribed cut-off time and manually stamped in the time-dated receiving system by the Securities Origination Division of BTr. The BTr shall not be liable for any errors in tenders received or for delays in the transmission of tenders beyond the prescribed cut-off period for submission and receipt of tenders. SECTION 24. Auction Committee. All tenders received on time shall be deliberated upon immediately after the cut-off time set by the Auction Committee composed of the Secretary of Finance, as Chairperson; the Treasurer of the Philippines as Vice Chairperson; the Assistant Secretary for the Domestic Finance Group of the Department of Finance or duly authorized representative as Member; the Deputy Treasurer of the Philippines for Operations or duly authorized representative as Member; the Deputy Governor for the Banking Services Sector, Research and Treasury of the BSP or duly authorized representative, as Member; the Head of the Treasury Department of the BSP or duly authorized representative, as Member; and the Director of the Market Regulation Department of the SEC or duly authorized representative, as Member. TAIEcS At least four (4) members of the Auction Committee shall constitute a quorum to do business. The Deputy Treasurer of the Philippines for Operations shall also act as the Executive Officer of the Auction Committee. The Secretary of Finance may designate an additional member(s) in the Auction Committee as he may deem appropriate. The Auction Committee staff support shall be provided by the appropriate division of BTr. SECTION 25. Award for Tenders. The Auction Committee shall make a decision as to the amount and rate of the awards. Such decision shall be transmitted immediately to the winning accredited buyers through the Auction System, except on any downtime of the Auction System in which case the decision of the Auction Committee shall be transmitted manually in the prescribed notice of award form of BTr. The Executive Officer of the Auction Committee or duly authorized representative shall confirm the transmitted decision. The Vice Chairman shall authorize the posting of the confirmed and awarded Government Securities to the winning accredited buyer's Primary Securities Account in RoSS, subject to receipt of auction proceeds. A print-out of the auction results summary shall be signed by the members of the Auction Committee. SECTION 26. Apportionment of Awards and Reservation of Right. Unless otherwise provided in the public notice of offering by the Secretary of Finance through BTr, the lowest rate offered by bidders for Competitive Bids will be accepted in full down to the amount required after deducting the amount of Non-Competitive Bids from the total amount of issue(s). At cut-off level, if the same rate appears in two (2) or more Competitive Bids or Tenders, and it is necessary to accept only part of the amount offered at such rate, the amount accepted at such rate shall be prorated in accordance with the respective amounts applied for. If the amount is the same, the proration of odd amount shall be applied in accordance with the terms and conditions as stated in the public notice of offering. Non-Competitive Bids or Tenders shall be accepted at the weighted average yield of the accepted Competitive Bids or Tenders. The Auction Committee reserves the right to accept or reject any or all tenders or parts of the tenders and to award less than the amount applied for and any action it may take shall be final. SECTION 27. Payment of Awards. Payment on awarded issues shall be made or completed in accordance with the prescribed settlement cut-off time of BTr. In the event of a national or local holiday or fortuitous event when no settlement of the Government Securities and/or cash can be effected, the settlement date shall be adjusted to the next business day. Due notice shall be issued by BTr through the Auction System, or in the prescribed notice form of BTr in case of any downtime of the Auction System. cADTSH On settlement date, BTr shall instruct the debiting of the winning accredited buyer's Settlement Bank account and the crediting of the deposit account of the Treasurer of the Philippines under Section 47 of this Order. PART 2 Over-the-Counter Method SECTION 28. Terms of Over-the-Counter Sale of Government Securities. The BTr shall issue a public notice of offering prescribing the terms and conditions for the over-the-counter origination or sale of Government Securities. SECTION 29. Allowable Funds; Scope of Investment. GOCCs and LGUs shall be allowed to purchase Government Securities using investible funds or idle funds in excess of normal operating requirements in the case of LGUs. The phrase "idle funds in excess of normal operating requirements" shall generally mean the level of funds which an entity can freely invest in Government Securities after considering provisions for coverage of such (1) regular and recurring operating expenses such as salaries and wages, repairs and maintenance, inventories and supplies, debt servicing, etc. within the context of the entity's cash operating cycle; and (2) local counterpart commitments for capital expenditures within the current fiscal year. In case of LGUs, unremitted national collections and funds set aside for payments of obligations to government corporations/cooperatives shall not form part of their idle funds. New and internally-generated excess funds of GOCCs, i.e. , funds which have not been previously invested in Government Securities nor sourced from equity or subsidy from the National Government may also be invested in Government Securities. Temporary idle funds of LGUs qualifying as local counterpart commitments for capital expenditures within the current fiscal year may also be invested in Government Securities as may be allowed by their cash requirements, and provided that such investments will not delay the implementation of covered projects. SECTION 30. Form and Cut-off Time. Placements of GOCCs, LGUs, and TEIs shall be transmitted to BTr (Attention: Securities Origination Division, Liability Management Service) in the prescribed placement forms and in accordance with such time as may be prescribed by BTr. Placements may be submitted in hard copy or via facsimile or any other mode of transmission acceptable to the BTr. The BTr may lawfully rely and execute such placement instruction within the settlement cut-off time for settlement payment with the Settlement Bank. The BTr shall not be liable for damages or losses on the GOCC, LGU or TEI for effecting settlement payment instructions. aHSTID On or before 4:00 P.M. on the day of placement, the GOCCs/LGUs/TEIs shall submit the duly executed placement form, in duplicate, to BTr (Attention: Securities Origination Division, Liability Management Service). Submitted placements of GOCCs, LGUs and TEIs shall be acknowledged by BTr (Securities Origination Division, Liability Management Service). SECTION 31. Pricing of Placements. Pricing of Government Securities offered or issued to GOCCs, LGUs and TEIs shall be as prescribed by BTr. SECTION 32. Specific Requirements for TEI Accounts. A TEI or its managing bank/financial institution shall: (a) To open a tax-exempt RoSS securities account, submit to the Securities Origination Division, Liability Management Service a (i) Certified copy of current ruling (not more than a year) from the Bureau of Internal Revenue regarding its status as a tax-exempt institution; (ii) Copy of the Board Resolution or as embodied in the Secretary's Certificate duly certified by the Corporate Secretary authorizing the placement (directly for managed funds or indirectly through designated trustee bank/financial institution in the case of managed trust funds) in Government Securities; and (iii) Copy of the covering trust agreement; and (b) Perform all acts and undertaking connected therewith including the designation of person(s) authorized to exercise such functions. SECTION 33. Amount of Placements. The minimum amount of placement shall be P500,000 for GOCCs and LGUs, and P1.0 Million for TEIs, and in even multiples of P100,000.00 in any case. SECTION 34. Settlement of GOCC, LGU and TEI Placement. Settlement of GOCC, LGU and TEI over-the-counter placement shall be on the same day as placement date. Upon placement/maturity of Government Securities, BTr RoSS shall credit/debit the concerned GOCC/LGU/TEI RoSS Primary Securities Account. Simultaneously, the Settlement Bank shall correspondingly debit/credit the GOCCs/LGUs/TEIs Cash Account and credit/debit TOP's Account with the Settlement Bank. SECTION 35. Proof of Over-the-Counter Placement. Government Securities placement of GOCCs, LGUs or TEIs shall be evidenced by the acknowledgment of the placement in the executed placement document. SECTION 36. Transfers. Government Securities held by GOCCs, LGUs and TEIs may be transferred prior to maturity to any person, regardless of tax classification, in any BTr-accredited GSTM. AHDaET PART 3 Tap Method SECTION 37. Participants. The tap facility shall be available to Market Makers, BTr-Managed Funds and other entities or instrumentalities as may be allowed by the Secretary of Finance or through BTr. SECTION 38. Methods of Issuance and Features of GS Issued Under Tap. Primary origination or sale of Government Securities through tap shall be announced through a public notice of offering. The issue ceiling, yield and amount for Government Securities available on tap shall be as announced or as negotiated by BTr. ARTICLE III Secondary Market for Government Securities PART 1 General Provisions SECTION 39. Secondary Market Transfers. Transfers of Government Securities in a BTr-accredited GSTM shall be governed by this Order and the applicable rules and regulations issued by the Secretary of Finance through BTr, the rules and regulations of the SEC and the rules and conventions of such BTr-accredited GSTM. SECTION 40. Transfers Across Tax Categories. Transfers of Government Securities between market participants shall be allowed regardless of tax status, subject to the rules and regulations to be issued by BTr to ensure the proper assessment and collection of taxes. SECTION 41. Accreditation of Secondary Market Participants. The BTr shall promulgate the appropriate rules and regulations to classify and accredit participants in the secondary market of Government Securities based on their activities therein and their participation in a Government Securities Trading Market. The participants that may be allowed are Market Makers, Dealers and Brokers. Notwithstanding the foregoing, the Secretary of Finance through BTr shall have the power, in accordance with this Order, to further and additionally classify and accredit participants in the secondary market, prescribe standards and qualifications defined by it for such classifications, establish a hierarchy of market participants based on their commitment to the Government Securities market, including incentives to ensure accredited participants' ability to support its commitments to the Government Securities market and enhance liquidity in the secondary market. The BTr shall prescribe mechanisms to monitor compliance with commitments and take such actions as are necessary to enforce the classification system, including suspension/revocation of incentives, suspension/revocation of the accreditations granted and such other actions necessary and incidental hereto to protect the Republic of the Philippines and the investing public from fraud or loss. ECaScD SECTION 42. Special Covenants of All Accredited Secondary Market Participants. All accredited participants, by application for any such accreditation of whatever classification, are deemed to have given consent to the disclosure to BTr of their activity in the Government Securities market by a GSTM. No other written consent shall be deemed necessary to give effect hereto, other than the accreditation granted by BTr under this Order and implementing issuances issued by BTr in relation hereto. PART 2 GS Trading Market Accreditation Standards SECTION 43. Market Structure. The Secretary of Finance through BTr may accredit any trading market as a GSTM; provided, the GSTM is duly recognized by the SEC under applicable law, rules and regulations. SECTION 44. Documentation. A GSTM shall be accredited as such by BTr through a Listing Agreement or other appropriate document showing BTr's consent to have Government Securities traded and settled on such GSTM. SECTION 45. GSTM Rules. The GSTM shall adopt such rules and conventions as are necessary to give effect to its obligations under its accreditation. SECTION 46. Minimum Requirements for GSTM. A GSTM shall comply with the following minimum requirements to be qualified for accreditation: I. GS Trading Market Facilities. a. Transaction Modes. The GSTM shall allow negotiated transactions and/or automatic matching processes, or any other transaction modes as may be notified to the BTr. b. Retail Market Structure. The GSTM shall allow retail investors to participate therein in accordance with relevant regulation and at the trading lots prescribed by BTr. c. Accessibility. The GSTM shall be accessible as much as possible on a nationwide basis. The GSTM shall be deemed to be in compliance herewith where regional or key cities in provincial areas are capable of accessing the trading system directly. d. Regulatory environment. The GSTM shall be under the oversight of a Self-Regulatory Organization (SRO) duly recognized as such by the Securities and Exchange Commission, with rulemaking and enforcement powers, and independent compliance and surveillance functions as required under the Securities Regulation Code or its successor law. EcICDT II. GSTM Participants. The GSTM shall include the participation of brokering entities, dealing entities and qualified investors. III. Monitoring Facilities on Market Participants. The GSTM shall have facilities required to monitor and report on the secondary market performance of GS Market Participants accredited by BTr, based on performance criteria prescribed by BTr. IV. Price Transparency. The GSTM shall have price transparency mechanisms consisting of public dissemination facilities that capture transaction data and disseminate the same in accordance with timeliness standards under applicable regulation. V. Liquidity Facilities for Failed Trades Management and to Support Trading Activities a. Cash Liquidity Programs. The GSTM shall operate programs that seek to address cash liquidity concerns of its participants, which shall serve as part of the GSTM's failed trades management activities. Such cash liquidity programs shall have the following essential features: (1) SRO. Cash Liquidity Programs shall be under the oversight of a duly registered Self-Regulatory Organization (SRO); provided, however, that the SRO may exempt certain entities or activities from its SRO oversight with concurrence of the SEC. (2) Risk Mitigation Mechanisms. Cash Liquidity Programs shall have in place mechanisms that mitigate risks, such as, but not limited to, collateralization of transactions. (3) Collateral Administration and Management. Cash Liquidity Programs shall include the participation of an entity that shall take delivery of collateral with the task of monitoring and acting to maintain collateral levels at agreed upon levels and conduct resolutions processes. (4) Regulatory Approval. Such Cash Liquidity Programs must be approved by the relevant regulatory authorities having jurisdiction over the GSTM and the participants contemplated. b. Securities Liquidity Programs. The GSTM shall operate programs that seek to address securities liquidity concerns of its participants, which shall serve as part of the GSTM's support for the trading activities of its participants. Such securities liquidity programs shall have the following essential features: ScTIAH (1) SRO. The Securities Liquidity Program shall be under the oversight of a duly registered Self-Regulatory Organization (SRO); provided, however, That the SRO may exempt certain entities or activities from its SRO oversight with concurrence of the SEC. (2) Risk Mitigation Mechanisms. Securities Liquidity Programs shall have in place mechanisms that mitigate risks, such as, but not limited to, collateralization of transactions. (3) Collateral Administration and Management. Securities Liquidity Programs shall include the participation of an entity that shall take delivery of collateral with the task of monitoring and acting to maintain collateral levels at agreed upon levels and conduct resolutions processes. (4) Regulatory Concurrence. Such Securities Liquidity Program shall have been approved by the relevant regulatory authorities having jurisdiction over the GSTM and the participants contemplated. VI. Trading Programs that Promote Equality of Access. The BTr shall establish trading programs that enhance market access and allow equality of access by its participants, which Programs shall be implemented through the GSTMs accredited by it. The GSTM shall provide facilities to ensure that counterparty risks are sufficiently mitigated through the use of bilateral counterparty limits, margin-based trading limits, pre-delivery and such other mechanisms to mitigate counterparty risk. VII. Settlement Standards. The GSTM shall observe the following settlement standards: a. Straight-Through Process. The GSTM shall provide for settlement on a straight-through process mode, to ensure minimization of operational inefficiencies. b. Delivery-versus-Payment. The GSTM shall settle trades conducted on its systems on a delivery-versus-payment (DvP) mode. Such settlement may allow investors to settle directly into their cash and/or securities accounts. c. Clearing Authority. The GSTM shall ensure that its clearing and settlement processes use intermediaries that are authorized by the Securities and Exchange Commission to perform the clearing and settlement process of the GSTM. CSDAIa VIII. Other Capabilities. The GSTM shall likewise have the following capabilities. a. Business Continuity Plan (BCP) and Disaster Recovery Program (DRP) Requirements. The GSTM shall provide BTr a copy of its DRP and BCP. b. Ability and Undertaking to Link with Existing Markets and Payment Systems. All GSTMs shall have the capability to link with existing GSTMs and payment systems. c. Electronic Interface. All GSTMs shall have automated interface with the RoSS. ARTICLE IV Miscellaneous SECTION 47. Deposit Account. The Treasurer of the Philippines shall maintain a deposit account with the Bangko Sentral ng Pilipinas or authorized government depository bank to which all proceeds from the sale of Government Securities under R.A. No. 245, as amended, and R.A. No. 1000, as amended, shall be credited and all payments for interest and redemption of Government Securities shall be charged. SECTION 48. Reservation as to Terms of these Rules and Regulations. The Secretary of Finance reserves the right to amend, supplement, revise, prescribe or withdraw all or any of the provisions of these rules and regulations at any time, or from time to time. SECTION 49. Inconsistent Circulars, Memoranda, and Orders. This Order expressly supersedes and repeals Department Order No. 141-95, as amended. All circulars, memoranda or orders inconsistent herewith are hereby revoked or modified accordingly. SECTION 50. Transitory Provision. The BTr is hereby authorized to implement the requirements of this Order in such manner deemed appropriate under the circumstances, and shall further prescribe the transitory provisions necessary to ensure a smooth transition from the present state of the Government Securities market to the environment contemplated under this Order. SECTION 51. Effectivity. These Omnibus Revised Rules and Regulations shall take effect immediately. (SGD.) MARGARITO B. TEVES Secretary of Finance ATTACHMENT Current Proposed Remarks DEPARTMENT ORDER NO. 141-95 DEPARTMENT ORDER NO. ____ (As Amended) REVISED RULES AND REGULATIONS OMNIBUS REVISED RULES FOR THE ISSUANCE, PLACEMENT, AND REGULATIONS The Title of the Department SALE, SERVICE AND REDEMPTION IMPLEMENTING R.A. NO. 245, Order sets forth its coverage OF TREASURY BILLS AND BONDS AS AMENDED, AND R.A. NO. and intention. UNDER R.A. NO. 245, AS 1000, AS AMENDED, IN RELATION AMENDED TO R.A. NO. 7653 1. Legal Basis: New. This part of the Pursuant to R.A. No. 7653, otherwise 1.1 This Order is issued pursuant preamble sets for the legal known as the "New Central Bank Act", the to Republic Act No. 245, as amended, basis. Department of Finance, through the and Republic Act No. 1000, as Bureau of the Treasury, shall be assuming amended, in relation to Republic Act the fiscal function of issuing Treasury Bills No. 7653 to prescribe the omnibus and Bonds effective November 16, 1995, revised rules and regulations on the however, the placing, servicing, selling and issuance, placement, recording, redeeming shall remain with the Bangko selling, servicing, redemption and Sentral ng Pilipinas until assumption of the payment of Government Securities New. This provision in the same by the Bureau of the Treasury. issued by the Republic of the preamble sets forth the Philippines. applicable laws underlying the In accordance with Section 4 of R.A. No. proposed Order, and the 245, as amended, the following rules intention of the same. and regulations governing the issuance, placement, sale, service and redemption of Treasury Bills and Bonds authorized under the said Act are hereby prescribed: 1.2 The Secretary of Finance is mandated under Republic Act No. 245 to prepare and issue such rules, regulations, and instructions as he considers necessary for the successful achievement of the New. This provision aligns the purposes of meeting public proposed Order with the No provision. expenditures authorized by law mandate of the Secretary of or providing for the purchase, Finance under applicable law. redemption, or refunding of any obligations, either direct or guaranteed, of the Philippine Government, taking such measures as he may deem necessary to protect the Republic of the Philippines and the investing public from fraud or loss. 1.3 The Secretary of Finance is No provision. authorized to prescribe the form or forms, the interest and discount rates, the denominations, maturities, negotiability, convertibility, call and New. This provision aligns the redemption features, and all other proposed Order with the terms and conditions of issuance, mandate of the Secretary of placement, recording, sale, Finance under applicable law. servicing, redemption, and payment of all evidences of indebtedness issued under the authority of Republic Act Nos. 245 and 1000. 2. Purposes New. This part of the preamble sets forth the purpose of the proposed Order. 2.1 To provide a liquid and organized environment for Government Securities issued by the Republic and make the same more attractive New. This provision aligns the to investors thereby enhancing the proposed Order with the capability of the Republic to raise mandate of the Secretary of needed funds from public borrowings Finance under applicable law. to achieve the purposes set forth in Republic Act Nos. 245 and 1000. 2.2 To allow various participants in New. This provision states the the Government Securities market policy of the Secretary of to trade, transfer, or encumber in Finance to lift current and among themselves despite transactional barriers that differences in their tax status in due should not impede liquidity, consideration of the innovations of since advances in technology technology which now enable the and law have already been tracking of beneficial ownership and made. In particular, the development of a legal framework technological advances allow that recognizes electronic evidence recording of ownership down of recording beneficial ownership. to the level of beneficial ownership and tracking of taxes despite transactions that cross tax classes. These have already been used to support trading and settlement for US dollar tranches of the recently issued Multicurrency Retail Treasury Bonds. Furthermore, legal and regulatory framework now recognizes the electronic recording of beneficial ownership and requires delivery of securities bought to beneficial owners or their agents. As such, the tracking can be put in place to ease transfer restrictions that are present in the current DO 141-95. 2.3 To establish an orderly New. This provision aligns the environment and appropriate proposed Order with the oversight over the secondary mandate of the Secretary of market for Government Finance under applicable law. Securities consistent with relevant laws, rules and regulations which now require the existence of organized secondary markets under the regulatory oversight of the Securities and Exchange Commission, even for securities which are exempt under the Securities Regulation Code, such as Government Securities, to protect the Republic of the Philippines and the investing public from fraud or loss. 2.4 To establish the minimum New. Investor protection standards for secondary markets of dictates that all investors in Government Securities to ensure that GS should be able to enjoy all investors of Government Securities parity of liquidity and enjoy equal benefits regardless of secondary market facilities market venue. in any secondary market structure where such investor is serviced. In accordance with Republic Act No. 245, as amended, and Republic Act New. This provision sets forth No. 1000, as amended, in relation to the legal bases for the Sections 117, 118, 119, 120, 121, adoption of the proposed 122, and 129 of Republic Act No. order. 7653, the following Omnibus Revised Rules and Regulations governing the Issuance, Placement, Sale, Servicing and Redemption of Government Securities issued by the Republic of the Philippines are hereby adopted: I. GENERAL PROVISIONS Article I GENERAL PROVISIONS Part 1 New. Section on definition of DEFINITION OF TERMS terms is intended to No provision. facilitate understanding and interpretation of the regulations. Section 1. Definition of Terms. New. Standard opening When used in this Order, the terms language for a section on below shall have the following definition of terms. meaning: Section 8. Definition. Auction is a 1. Auction Method is a method Emphasizes that buyers in the method of sale of government securities of sale or origination of auction method are first whereby prospective buyers compete Government Securities whereby accredited by the BTr before against each other by trying to better prospective buyers accredited they can participate in the each others bids. by BTr submit tenders or bids primary market. Emphasis is through the Auction System. also laid on the process of auction which is transmission through the auction system. 2. Auction System means an No provision. auction system used by BTr for New provision. Definition is the primary or origination sale intended to facilitate of Government Securities understanding and through an Auction Method. interpretation. Unless the context otherwise requires, the term Auction System shall include ADAPS or such other BTr-accredited auction system. 3. Automated Debt Auction Processing System or "ADAPS" means the electronic auction system that accepts and processes bids for auction of Government Securities. 4. Brokers are institutions licensed as such by the SEC in respect of Government Securities. 5. BSP shall refer to the Bangko Sentral ng Pilipinas, or its successor agency. 6. BTr means BTr or National Treasury, or its successor agency. 7. BTr-Managed Funds shall refer to funds managed by BTr pursuant to law or contract. No provision. 8. Competitive Bid or Tender means a bid or tender to purchase a stated par amount of securities at a specified yield or rate. 9. Dealers are financial institutions licensed as such by the SEC in respect of Government Securities. 10. Dutch or Single Price Auction means an auction in which all successful bidders pay the same price regardless of the bid yields or rates that each of them submits. 11. English or Multi-Price Auction means an auction in which each successful competitive bidder pays the price equivalent to the bid yield or rate that each of them submits. From Section 37: 12. Financial Institution shall mean Added the language "under corporations organized as such the appropriate regulatory Section 37. Definition of Terms. primarily to deal in financial requirements of Bangko (a) Financial Institutions are corporations assets through borrowing funds Sentral ng Pilipinas, the organized as such primarily to deal in from savers or investors and Securities and Exchange financial assets through borrowing funds lending funds to users, producers Commission, or the Insurance from savers or investors and lending funds and other financial institutions. Commission." at the end of to users, producers and other financial This may refer to banks, the sentence for clarity on the institutions. These may either be done by non-bank financial regulatory agencies. banks, non-bank financial intermediaries, intermediaries, insurance insurance companies, securities dealers companies, securities dealers or brokers, investment houses, finance or brokers, investment houses, companies and mutual funds. finance companies and mutual funds under the appropriate The term Government-Owned and regulatory requirements of -Controlled Corporation shall refer to a Bangko Sentral ng Pilipinas, the corporation which is created by special law Securities and Exchange or organized under the Corporation Code Commission, or the Insurance in which the Government, directly or Commission. indirectly, has ownership of the majority of the capital or has voting control. 13. "Government-Owned or No revision. Controlled Corporation shall" No revision. refer to a corporation which is (Transposed from current DO created by special law or 141-95, Section 19, letter (a).) organized under the Corporation Code in which the Government, directly or indirectly, has ownership of the majority of the capital or has voting control. 14. Government Securities for purposes of this Department Order shall mean securities New provision. Definition is issued by the Republic of the intended to facilitate Philippines and includes understanding and Treasury bills, certificate of interpretation. indebtedness, Treasury bonds, notes, securities, and other evidence of indebtedness. 15. "Government Securities Eligible Dealer or "GSED" means a" SEC-licensed dealer in Government Securities accredited by BTr to participate in the primary or origination sale No provision. of Government Securities. 16. "Government Securities Trading Market or "GSTM" shall refer to an SEC-authorized trading market accredited by BTr under this Order as a secondary market for Government Securities. 17. Local Government Unit shall refer to a political subdivision of the Republic of the Philippines consisting of provinces, cities, municipalities, or autonomous regional political subdivision authorized by law to issue bonds or incur indebtedness. 18. Market Maker means a GSED accredited by BTr who commits to provide firm two-way quotes in Government Securities in accordance with the relevant BTr rules and regulations. 19. Non-Competitive Bid or Tender means a bid or tender No provision. to purchase a stated par amount of securities at the weighted average interest rate resulting from the accepted Competitive Bid or Tender. Section 15. Definition. A manner of sale 20. Over-the-Counter Method is a Empowers BTr to allow other or offering of Special Series/Issues of manner of primary origination or types of entities to be Government Securities for Government- sale of Government Securities engaged in the primary or Owned and -Controlled Corporations through offer or negotiation to origination sale of GS (GOCCs), Tax-Exempt Institutions (TEIs) entities as may be allowed by through OTC method, and Local Government Units (LGUs), BTr such as but not limited to where this is limited under through negotiation, not through auction. Government-Owned or the current Department (As amended by Department Order Controlled Corporations Order to GOCCs, TEIs No. 81-96, Series of 1996, June 10, 1996) (GOCCs), Local Government and LGUs. Units (LGUs), or Tax-Exempt Institutions (TEIs). 21. Primary Securities Account New provision. Definition is No provision. shall refer to the securities intended to facilitate account in RoSS maintained understanding and by a participant. interpretation. Section 29. RoSS (Registry of Scripless 22. Registry of Scripless Securities Securities). The Secretary, through or "RoSS" means the electronic Clarifies the definition of the Bureau of the Treasury, having floated registry, which serves as the electronic registry found in Treasury Bills and Bonds which are not official and final record of current Section 29 to include represented by a physical certificate shall ownership or interest in finality of the record. Also record their transfers in RoSS, which is Government Securities. Unless includes a BTr-accredited the official registry of ownership of or the context otherwise requires, sub-registry as part of the interest in scripless securities floated by the term RoSS shall include any definition. the Republic of the Philippines. BTr-accredited electronic sub-registry. 23. SEC shall refer to the Securities and Exchange Commission of the Philippines, New provision. Definition is or its successor agency. intended to facilitate understanding and 24. Settlement Bank shall refer interpretation. No provision. to BSP or to a bank or non-bank financial institution designated by a bondholder for any settlement of primary market purchases, receipt of coupon and/or redemption payments of Government Securities. The Settlement Bank must be a member of the applicable payment system such as BSP Philippine Payment and Settlement System (PhilPaSS) or Philippine Domestic Dollar Transfer System (PDDTS). 25. Tax-Exempt Institution shall No provision. refer to an entity declared and certified by the Bureau of Internal Revenue as exempt from the applicable tax under the National Internal Revenue Code. Section 26. Definition. A manner of sale 26. Tap Method means a manner Tap Method is currently open or offering of Government Securities open of sale or offering of Government to all GSEDs, not only Market exclusively to Government Securities Securities open exclusively to Makers. Also, this proposal Eligible Dealers (GSEDs) and Financial GSEDs qualifying as Market will formalize the use of the Institutions in the event of an acute and Makers, BTr-Managed Funds, Facility by BTr-Managed protracted shortage of government and other entities or Funds and expand securities. (As amended by Department instrumentalities as may be participation in the TAP Order No. 2-98, Series of 1998) allowed by the Secretary of Facility to other entities that Finance or through BTr. may be allowed by the Secretary of Finance through the BTr. Language regarding the availability of the facility during event of acute and protracted shortage of government securities was deleted to provide flexibility to the issuer. Part 2 New. Heading added for No provision. POWERS OF THE better organization of the SECRETARY OF FINANCE document. Section 1. Authority to Borrow. Under Section 2. Authority to Borrow. Section 1 of R.A. No. 245, as amended Under Section 1 of R.A. No. 245, as and R.A. No. 1000, as amended, the amended, the Secretary of Finance, Secretary of Finance, with the approval with the approval of the President No substantial difference. of the President of the Philippines, and of the Philippines, and after Reference to RA No. 1000 is after consultation with the Monetary consultation with the Monetary in the next paragraph Board, is authorized to borrow from Board, is authorized to borrow Replaced "Treasury Bills and time to time on the credit of the from time to time on the credit Bonds" with "evidence of Republic of the Philippines such of the Republic of the Philippines indebtedness" to allow sum(s) as in his judgment may be such sum(s) as in his judgment may greater flexibility in the form of necessary to meet public expenditures be necessary to meet public borrowing instruments. authorized by law or to provide for the expenditures authorized by law or to purchase, redemption or refund of provide for the purchase, redemption any obligation, either direct or or refunding of any obligation, either guaranteed, of the Philippine direct or guaranteed, of the Philippine Government, and to issue thereof Government, and to issue thereof Treasury Bills and Bonds which evidence of indebtedness which may may be made payable in be made payable in Philippine Philippine currency, or in any currency, or in any readily readily convertible foreign convertible foreign currency. currency. Under Section 1 of R.A. No. 1000, This provision is a substantial No provision. as amended, upon the reproduction of the provision recommendation of the Secretary of Section 1 of R.A. No. 1000. of Finance, the Monetary Board, and the National Economic and Development Authority, the President of the Philippines is authorized to issue, preferably in the Philippines, or abroad if necessary, in the name and in behalf of the Republic of the Philippines bonds, including lottery bonds, to finance public work and projects for economic and social development which have high economic or social rates of returns and which are authorized by law, including expropriation of lands for subdivision and resale to individuals, or to repay or service bonded obligations of the Government incurred for such projects. The bonds issued under the authority of this section may be made payable both as to principal and interest, in Philippine currency or any readily convertible foreign currency. Section 2. Issuance of Treasuries. Section 3. Issuance of Government All throughout the term The exercise of authority to borrow by the Securities. The exercise of Government Securities Secretary of Finance of such sum(s) as authority to borrow by the President replaces the "Treasury Bills", may be necessary to meet public of the Philippines or the Secretary Treasury Bonds and expenditures shall be through the issue of of Finance shall be through the Treasuries terminology in Treasury Bills and/or Treasury Bonds, issue of Government Securities, the current DO. Under the and shall be undertaken by an Auction and shall be undertaken by an proposed DO, Treasury Committee hereinafter constituted Auction Committee hereinafter Bonds and Treasury Bills are whenever auction is prescribed and by constituted whenever auction is referred to as such, where the Bureau of the Treasury whenever prescribed and by BTr whenever specific reference is made, any other method is authorized. any other method is authorized. and collectively, they are referred to as Government Securities. The term Government Securities has been defined in the Definition of Terms portion of the proposed D.O. Section 3. Terms, Yields, Etc. The Section 4. Authority of the Secretary Secretary of Finance, in consultation with of Finance to Prescribe the Features the Monetary Board, shall prescribe the of Government Securities. The Last sentence added for terms, yields, denominations, maturities, Secretary of Finance, in consultation clarity, to supplement the negotiability, convertibility, call, eligibility, with the Monetary Board, shall provision in terms of other redemption and other features of the prescribe the terms, yields, features of GS that are not Treasury Bills and Bonds, including denominations, maturities, mentioned. documentary stamps tax on the original negotiability, convertibility, call, issue and final withholding tax on the eligibility, redemption and other Additional sentence: income derived from Treasury Bills features of the Government Other terms and conditions of and Bonds. Securities, including documentary Government Securities issued stamps tax on the original issue pursuant to this Order shall be and final withholding tax on the subject to the provisions of income derived from Government R.A. Nos. 245 and 1000, as Securities. Other terms and applicable. conditions of Government Securities issued pursuant to this Order shall be subject to the provisions of R.A. Nos. 245 and 1000, as applicable. Section 5. Authority of the Secretary of Finance to Prescribe Standards on Secondary Market of Government No provision. Securities. The Secretary of New. Emphasizes the power Finance, through BTr, shall determine of the Secretary of Finance to the appropriate secondary market prescribe the standards for structure for Government Securities, secondary markets of GS. in accordance with relevant laws and This authority of the Secretary regulations, as well as require the of Finance emanates from implementation, through BTr, of an R.A. 245. accreditation framework for GSTMs and its participants and provide the necessary environment to ensure the liquidity of the issues and the development of the investor base. II. FEATURES OF Part 3 TREASURY ISSUES CLASSIFICATION, FEATURES, New. Improved heading. PRICING, AND REDEMPTION OF GOVERNMENT SECURITIES Section 6. Classification of Government Securities. (1) New. Heading added for No provision. Government Securities issued better organization of the pursuant to R.A. No. 245, as document. amended are classified as follows: Section 4. Treasury Bills. Treasury Bills a. Treasury bills issued on a shall be issued on a discount basis and discount basis or at par and payable on maturity of not more than payable at maturity without one (1) year at face amount. They may be interest. Treasury bills may be offered for sale through competitive or offered for sale either on a non-competitive auction or any other competitive basis or at a fixed method as determined appropriate by rate of discount or at par and the Bureau of the Treasury. All Treasury may be made payable at any Bills bearing the same date of issue and date not later than one year the same date of maturity shall constitute from the date of issue; one Issue; and consecutive issuance of Treasury Bills of the same maturity shall constitute a Series. This enumeration is contained b. Certificate of indebtedness in P.D. No. 142, which having maturities not exceeding amended R.A. 245. No provision. eighteen months from the date of issue; and Section 5. Treasury Bonds. Treasury c. Treasury bonds, notes, securities Bonds shall be issued at a discount basis, or other evidences of indebtedness at a premium, or at par and payable on having maturities of one year maturity of not earlier than one (1) year or more but not exceeding but not later than twenty-five (25) years. twenty-five years from the They may be offered for sale through date of issue. competitive or non-competitive auction or any other method as determined appropriate by the Bureau of the Treasury. (2) Government Securities issued This part of the enumeration pursuant to R.A. No. 1000, is to cover issuances under as amended. RA No. 1000. (3) Cash management bills and This provision is an other evidences of indebtedness implementation of the not falling under Paragraphs (1) authority of the Secretary of and (2) above, issued by the Finance under RA 245 to Republic of the Philippines. issue other forms of evidences of indebtedness. Section 7. Pricing of Government Securities; Frequency of Payment. Government Securities may be issued No provision. at a discount basis, at a premium, or Consolidates current Sections at par and payable with or without 4 and 5 which separately coupon in accordance with the terms treated Treasury Bills and and conditions of issuance under a Bonds. The second sentence Notice of Offering or public notice reflects the computational issued by the Secretary of Finance convention for determining through BTr. Coupons due on coupon and the semi-annual coupon-bearing Government coupon payment is the norm Securities shall be payable for GS. semi-annually in arrears calculated on 30/360-days unless otherwise prescribed in the terms and conditions of issuance under a Notice of Offering or public notice issued by BTr. Section 6. Denomination and Exchange. Section 8. Denomination and Exchange. (1) Government New. This provision is added Securities issued in scripless form to reflect the actual market may be transacted in any face practice for transacting amount, subject to such requirements scripless GS. as the BTr may prescribe. Treasury Bills and Bonds shall be issued (2) Government Securities issued in in denominations of P10,000.00, certificated form shall be in P50,000.00, P100,000.00, P500,000.00, denominations of P10,000.00, Substantially retains the P1,000,000.00, P5,000,000.00 and P50,000.00, P100,000.00, current Section 6. The P10,000,000.00. Exchange of these bills P500,000.00, P1,000,000.00, proposed language adds a and bonds from higher to lower and/or P5,000,000.00 and proviso which will allow lower to higher denominations of identical P10,000,000.00 unless flexibility in determining issue and series may be effected at the otherwise prescribed in the denomination. Reference to Bangko Sentral ng Pilipinas until such time terms and conditions of BSP has been dropped as the Bureau of the Treasury can issuance under a Notice of considering that the BTr has assume the responsibility Offering or public notice issued already assumed the fiscal by BTr. Exchanges of agency function. Government Securities from higher to lower and/or lower to higher denominations of identical issue and series may be effected at BTr. Section 35. Servicing and Redemption. Section 9. Servicing and Substantially the same; Treasury Bills and Bonds which have Redemption. Government references to R.A. No. 245 been transferred through RoSS may be Securities issued by the Republic of and R.A. No. 1000 were exchanged at any time before maturity, or the Philippines pursuant to R.A. Nos. incorporated for clarity. redeemed at or after maturity, and payment 245 and 1000 as implemented by this shall be made by the Department of Order may be exchanged at any Finance, through the Bureau of the time before maturity, or redeemed Treasury, in accordance with RoSS, which, at or after maturity. Coupon and in turn, shall pay the person whose name redemption payments due on appears in RoSS as owner of the Treasury Government Securities shall be Bills or Bonds. (As amended by DOF made by the Republic of the Order No. 32-98, Series of 1998, Philippines, through BTr, to the March 13, 1998) person whose name appears in RoSS as registered owner of the Government Securities. Section 7. Taxation. The income derived Section 10. Taxation. (1) The Revisions were made: from Treasury Bills and Bonds, and income derived from Government 1. to cover all government instruments with recourse as authorized Securities issued pursuant to R.A. securities issued pursuant by Bangko Sentral ng Pilipinas (BSP) No. 245, as amended, shall be to RA 245, as amended; shall be subject to the 20% final income subject to the applicable final tax tax to be withheld on discounts valued rate under the National Internal 2. to apply the applicable at the time of issue on every original Revenue Code in force at the time final tax rate in alignment sale which shall be deducted by the of issue and the rules and at all times with the NIRC; buyer from the discounts of the regulations issued by the Bureau T-Bills/Bonds and included in the of Internal Revenue (BIR), to be remittance of the purchase price. withheld on discounts valued at the time of issue on every original sale In the case of Treasury Bonds, the 20% which shall be deducted by the final income tax shall be withheld on buyer from the discounts of the discounts valued at present value on every Government Securities and included original sale. Periodic coupon payments on in the remittance of the purchase Treasury Bonds shall be subject to the 20% price. Periodic coupon payments final income tax to be withheld at the time on Government Securities shall be the coupon payments are made. subject to the applicable final tax to be withheld at the time the coupon payments are made. (2) Government Securities issued This provision is for pursuant to R.A. No. 1000, as consistency with the law amended, shall not be subject referred to. For reference, the to taxation. last paragraph of Section 1 of Republic Act No. 1000, states the tax regime as follows: The bonds to be issued under this Act shall be exempt from taxation, including tax on foreign exchange, by the Government of the Republic of the Philippines or by any political or municipal subdivision thereof, which fact shall be stated on their face in accordance with this Act under which the said bonds are issued; and shall likewise be exempt from attachment, execution or seizure. The Documentary stamp tax on the original (3) The documentary stamp tax on No revision with respect to issue shall be for the account of the issuer. the original issue of Government issuances under RA 245. To Securities under R.A. No. 245 make a distinction of the tax shall be for the account of the environment of issuer. government securities issued under RA 245 and 1000, wherein in the latter, the bonds are exempt from taxation, without qualification. No other taxes shall be collected on (4) No other taxes shall be collected No substantial revision. subsequent trading of the securities which on subsequent trading of the Recasting is consequential to have been subjected to tax under the first securities which have been the consolidation of the first 2 two paragraphs herein. subjected to tax under the first paragraphs in the current paragraph herein. Department Order. (5) Taxation of Government New. This provision clarifies Securities transactions conducted the tax environment for GS under SEC-approved borrowing transactions under SEC- and lending programs of approved borrowing and accredited GSTMs shall be lending programs of governed by rules, regulations accredited GSTMs and issuances of the Bureau of Internal Revenue. (6) Taxation of repurchase New. This provision is to agreements covering Government reiterate the relevant No provision. Securities conducted under provision in the DST Law that relevant SEC-approved programs there are is no DST of accredited GSTMs and which repurchase agreements for provide for transfer of title over clarity and consistency. Government Securities subject of the repurchase agreement, shall be deemed to be covered by the exemption from documentary stamp tax under the relevant provisions of the Documentary Stamp Tax Law. Part 4 New. Heading added for IV. UNCERTIFICATED TREASURY FORM AND REGISTRY OF better organization of the ISSUES AND TRANSFERS GOVERNMENT SECURITIES document. Section 28. Issuance. The Secretary Section 11. Form of Government of Finance, through the Bureau of the Securities. Government Securities The proposed revision Treasury, may issue Treasury Bills and issued pursuant to R.A. Nos. 245 and recognizes the current Bonds which are not presented by a 1000 shall be issued in scripless form environment where scripless physical certificate. unless a physical certificate is is the norm for government otherwise prescribed by the securities, while still allowing Secretary of Finance through BTr. flexibility to issue in physical form, where prescribed. Section 29. RoSS (Registry of Scripless Section 12. Registry of Government Securities). The Secretary, through the Securities. Government Securities Bureau of the Treasury, having floated issued by the Republic of the The provision covers both RA Treasury Bills and Bonds which are not Philippines pursuant to R.A. Nos. 245 245 and 1000 issuances. The represented by a physical certificate and 1000, as well as all subsequent language on RoSS was shall record their transfers in RoSS, transfers of such Government transposed to the Definition of which is the official registry of Securities, shall be recorded in the Terms portion of the ownership of or interest in scripless RoSS. Proposed D.O. securities floated by the Republic of the Philippines. (As amended by DOF Order No. 32-98, Series of 1998, March 13, 1998) BTr shall issue such rules, regulations, The provision is incidental to and procedures for the operation of the power of BTr, as operator the RoSS as it deems necessary, of the registry, to issue what desirable and appropriate for the is necessary to operationalize proper performance of its registry the registry function. function. Section 13. Sub-Registrar and New. In line with the move of Sub-Registry Records. The BTr the Department to ensure a may engage a Sub-Registrar which safe and efficient secondary shall maintain the books and records market structure for debt of specific set of accountholders issuances of the National and their transactions. Government, there is a need to recognize varied modalities (a) Qualifications of a Sub-Registrar: of infrastructure support that could enhance our markets. i. The Sub-Registrar must be An important initiative of the a duly licensed entity under Bureau of the Treasury is the the jurisdiction of the BSP neutralization of the and/or the SEC and secondary market authorized to perform environment of its issues, to registry functions; allow holders of government securities of different tax ii. The Sub-Registrar must have classes to transact between the capability to service a and among each other, while tax unification program for preserving the tax regime for trading and settlement of the issue under tax laws. Government Securities in a manner acceptable to BTr, pursuant to this No provision. Order; Advancements in technology have enhanced registry (b) Duties of a Sub-Registrar. The corporate action systems Sub-Registrar shall perform which are now capable of the following duties: supporting a tax-neutral secondary market for debt i. It shall maintain an electronic issues. These systems can be sub-registry book, which engaged by the registry, shall contain all records of considering the benefits these transfers of ownership; could provide to the government securities market, ii. It shall electronically interface in terms of liquidity, with a BTr-accredited GSTM settlement, and potential for that provides services relative growth. BTr's RoSS sub- to clearing and/or settlement registry is functioning as such processes; for non-peso denominated government issues, and is iii. It shall perform such other capable of likewise servicing duties as may be prescribed the peso-GS market. The or required by BTr for the dollar tranches of the recently efficient and effective issued Multicurrency Retail recording of transactions Treasury Bonds are already on Government Securities. traded and settled in a tax- neutral environment. (c) The Sub-Registry records shall Neutralizing the tax form part of the official records environment allows the of RoSS. government issue to be geared and prepared towards regionalization, which is part of the government's goals in the foreseeable future. Section 31. Transfers. Treasury Bills and Section 14. Recording of Transfers. Aligns the provision to current Bonds may be validly transferred by making Government Securities may be validly regulatory environment where appropriate entries in RoSS maintained by transferred by making appropriate GS are issued in scripless the Bureau of the Treasury. Transfer in entries in RoSS. Such transfers form, and are recorded in RoSS has the effect of delivery of such shall have the effect of legal delivery book entry form. Hence, Treasuries in bearer form or duly of such Government Securities. removed references that are indorsed in blank of government securities applicable to the physical payable to order or a person whose environment bearer form, name is specified. (As amended by indorsed in blank or indorsed DOF Order No. 32-98, Series of 1998, to a specified person. March 13, 1998) Also, uses the term Government Securities to replace "Treasury Bills and Bonds" Section 32. Proof of Transfer through Section 15. Finality of Transfer RoSS. When Treasury Bills and Bonds through RoSS. Records of are transferred through entries in RoSS transfers of Government Securities Title of the provision was of the Bureau of the Treasury, that through entries in RoSS shall be changed to more accurately record shall be binding on the parties to binding on the parties to the transfer, reflect the content of the the transfer, and shall be final, conclusive and shall be final, conclusive and provision. and irrevocable unless RoSS had irrevocable. The procedure by which, acknowledge receipt of a contrary notice and the exact time at which such No substantial change. before the entry was made. The entries are created shall be governed procedure by which, and the exact by the rules of RoSS as prescribed time at which such entries are created by BTr. shall be governed by the rules of RoSS. (as amended by DOF Order No. 32-98, Series of 1998, March 13, 1998) Section 33. Pledge. A pledge of Section 16. Pledge of Government Treasury Bills and Bonds which have Securities. A pledge of Government been transferred through entries in Securities which have been transferred RoSS of the Bureau of the Treasury through entries in RoSS shall be shall be constituted, and the Treasury constituted, and shall accordingly be Bills and Bonds shall accordingly be considered delivered, in accordance considered delivered, in accordance with Articles 2093 and 2095 of the Civil with Articles 2093 and 2095 of the Code (RA No. 386) when RoSS certifies No substantial change. Civil Code (RA No. 386) when RoSS by an appropriate entry that the certifies by an appropriate entry that the Government Securities have been Treasury Bills and Bonds have been segregated and/or earmarked in favor segregated and earmarked in favor of of the pledgee. the pledgee. (As amended by DOF Order No. 32-98, Series of 1998, March 13, 1998) Section 34. Involuntary Liens on Section 17. Involuntary Liens and Provision updates the current Government Treasuries held by Encumbrances on Government language, considering the RoSS. Treasury Bills and Bonds which Securities Recorded in RoSS. assumption of the fiscal have been transferred through book- Involuntary liens, garnishment, agency by the BTr. Reference entries in the record of Bangko Sentral ng attachment, execution, or other to the Rules of Court more Pilipinas until such time RoSS can legal processes against Government clearly states the assume the responsibility may be attached Securities recorded in RoSS shall requirements for legal only by legal process upon the person in comply with the provisions of the process against GS subject to whose name the BSP or RoSS holds the Rules of Court promulgated by the the limitation under RA 245 account. (As amended by DOF Order No. Supreme Court of the Philippines and 1000. 32-98, Series of 1998, March 13, 1998) subject to R.A. Nos. 245 and 1000 prescribing limitation on garnishment or execution on Government Securities. Article II New. Heading added for No provision. PRIMARY MARKET OF better organization of the GOVERNMENT SECURITIES document. III. METHOD OF ORIGINATION Section 18. Methods of Origination. The following are the recognized A. Auction Method (Definition in current methods of issuing Government Section 8 is reproduced in the Definition of Securities: (a) Auction Method New. Merely lays the basis for Terms portion of this matrix, to compare (b) Over-The-Counter Method, and contents of Article II. the same against the proposed definition (c) Tap Method. The Secretary of under the Draft amendments.) Finance through BTr may prescribe such other methods of origination in issuing Government Securities. Part 1 New. Heading added for AUCTION METHOD better organization of the document. Section 19. Auction Process. Auctions of Government Securities New. Recognizes the No provision. may be conducted under a Dutch or methods of auction as stated Single Price Auction, English or in the new Section 19. Multi-Price Auction, or such other Reflects the types of action auction process as announced that may be adopted for by BTr. Government Securities. V. DEALERS ELIGIBLE TO BID AT Section 20. Participants in Auction of PRIMARY OR ORIGINATION SALE Government Securities. (1) Any OF GOVERNMENT SECURITIES financial institution may be accredited to participate as an accredited GSED Section 36. Except as may be modified by in the primary origination or auction of Substantially the same as the Secretary of Finance, when necessary Government Securities in accordance predecessor Section 36, but and as he may deem appropriate, any with the requirements of BTr. Except clarifies the meaning that any Financial Institution licensed by the Bangko as may otherwise be prescribed by institution may be accredited Sentral ng Pilipinas, Insurance Commission, BTr, an accredited GSED or as a GSED or financial or Securities and Exchange Commission to financial institution shall meet the institution to participate it the deal in securities shall be eligible to following criteria: primary origination or auction participate in the primary sale of of Government Securities, government securities as long as they provided the requirements meet the following criteria: enumerated are met. a. Unimpaired capital and surplus account (a) Unimpaired capital and surplus Definition of Unimpaired as defined in Section 37 (b) hereof, of account at any one time as capital and surplus was at least P100.0 Million at any one time. prescribed by BSP, the SEC, or transposed from definition of This must be proven by certification from the Insurance Commission. For terms in Section 37, which Bangko Sentral ng Pilipinas or the purposes of this Order, the term defined the same as follows: Securities and Exchange Commission or unimpaired capital and surplus the Insurance Commission; shall mean the combined capital Section 37, b. Unimpaired accounts of a financial institution Capital and Surplus means and refer to its unimpaired the combined capital paid-in capital and earned accounts of a financial surplus. The term "surplus" shall institution and refer to its refer to the excess of the assets unimpaired paid-in capital and over the liabilities and paid-in earned surplus. The term capital of the financial institution, surplus shall refer to the but excluding the reserves set excess of the assets over the aside for valuation purposes, and liabilities and paid-in capital of reserves for liabilities and the financial institution, but deferred income tax, and other excluding the reserves set capital adjustments; aside for valuation purposes, and reserves for liabilities and deferred income tax, and other capital adjustments. b. Certification by Bangko Sentral ng (b) Certification by BSP, SEC, or Pilipinas, Securities and Exchange Insurance Commission as to Commission or Insurance Commission compliance with Paragraph (a) that the institution is in good standing; and above including a certification that the financial institution is in good standing; and c. For purposes of participating in the (c) For purposes of participating in auction, such Financial Institution defined the primary origination or sale of in Section 37 (a) hereof shall have an Government Securities, such No substantial change. account with the Bangko Sentral ng Financial Institution shall have a Pilipinas where the settlement of the deposit account with a Settlement award may be debited, in order to Bank, where the settlement of the avoid making the deposit prior to the award may be debited. bidding. (As amended by DOF Order No. 32-98, Series of 1998, (d) Necessary interface, electronic or New. This provision clarifies March 13, 1998) otherwise, to effect participation that there is a technological in the methods of origination and requirement to participate in settlement of Government the primary market. Securities as prescribed by BTr. Accredited GSEDs may participate in New. This provision will allow No provision. competitive and non-competitive GSEDs to participate in auction. both competitive and non-competitive auctions. (2) Persons other than accredited New. This provision will pave GSEDs may be allowed to participate the way for participation of in the Auction on a non-competitive retail investors in the primary basis in accordance with the rules auction of Government and regulations that will be issued Securities. by BTr. Section 37. Definition of Terms. (a) Financial Institutions see Definition of terms portion of the proposed amendments for comparison. b. Unimpaired Capital and Surplus See remarks in the relevant transposed to (a) of the enumeration sections. in the proposed Section 20. See remarks field there. Section 9. Public Notice of Offering. Section 21. Public Notice of The Secretary of Finance may, from time to Offering. The Secretary of time, by public notice offer Treasury Bills Finance through BTr may, from and Bonds for sale and invite tenders, time to time, by public notice offer therefore, through the Bureau of the Government Securities for sale and Treasury. The Treasury Bills and Bonds invite tenders therefor. All tenders so offered, and tenders received shall or bids for Government Securities Introduces the concept of be subject to the terms and conditions of accredited buyers shall be accredited buyers who are imposed under these rules and transmitted through the Auction GSEDs, financial institutions regulations, except as they may be System. The Government Securities and other persons recognized modified by the Secretary of Finance, so offered, and tenders received shall as participants in the primary in consultation with the Monetary Board, be subject to the terms and conditions or origination sale of which shall be made part of the public imposed under this Order, except as Government Securities. notice of offering. The Public Notice they may be modified by the Secretary of Offering shall be transmitted of Finance, in consultation with the Auction System under the through the Bureau of the Treasury's Monetary Board, which shall be made proposed provision covers Automated Debt Auction Processing part of the public notice of offering. both ADAPS and other System (ADAPS) and/or by any other The public notice of offering shall be electronic auction system/s method as may be prescribed by the transmitted electronically to accredited that may be used by the BTr. Bureau of the Treasury and shall buyers through an Auction System indicate such information as may be and/or by any other method as may deemed appropriate by the Secretary be prescribed by BTr and shall of Finance. (As amended by indicate such information as may be Department Order No. 74-98, Series deemed appropriate by the Secretary of 1998, dated October 27, 1998) of Finance through BTr. In cases where the announced auction cannot be conducted due to a New. To provide flexibility in declared holiday or suspension of cases when a scheduled No provision. work or banking day, or fortuitous auction falls on an event, the auction for Government unplanned holiday. Securities shall automatically adjust to the next succeeding business day or as may be announced by the BTr. Section 10. Submission of Tenders. Section 22. Submission of Bids or Tenders in response to a public notice shall Tenders. Unless otherwise be transmitted to the Bureau of the prescribed by the Secretary of Treasury through ADAPS, which is capable Finance through BTr, bids or of electronically managing the tender of tenders in response to a public notice Treasury Bills and Bonds, in the case of of offering of Government Securities Removed manual entry in the GSEDs and in official tender forms required shall be transmitted to BTr through case of Non-GSEDs to by the BTr before the prescribed cut-off the Auction System. eliminate the distinctions time for receiving tenders for manual entry between GSEDs and non- to BTr's ADAPS, in the case of GSEDs and their manner of NON-GSEDs. (As amended by transmitting bids or tenders Department Order No. 74-98, Series through the Auction System. of 1998, dated October 27, 1998) In case of system failure, power outages In case of system failure, power or as may be authorized by the Secretary outages or as may be prescribed by of Finance, tenders shall be submitted in the Secretary of Finance through BTr, official tender forms required by the tenders for purchase of Government Substantially the same. Bureau of the Treasury before the Securities shall be submitted in official prescribed cut-off time for receiving tender forms required by BTr before tenders for manual entry to the Bureau the prescribed cut-off time for of the Treasury's ADAPS. receiving tenders for manual entry to the Auction System. Each tender shall be unconditional and shall Each tender shall be unconditional be for an amount of not less than P10.0 and shall be for a minimum nominal Substantially the same, but Million (maturity value) for dealers and 1.0 amount of P10.0 million and in removed distinction Million (maturity value) for nondealers. multiples of P1.0 million thereafter, between dealers and non unless otherwise prescribed by the dealers. Secretary of Finance through BTr. In case of Treasury Bills, bids shall be Unless otherwise provided in the public stated in three (3) decimal places e.g., notice of offering, yields of submitted Provides flexibility to the 13.000%. Bids for Treasury Bonds shall tenders for Government Securities issuer, to prescribe a different be in multiples of 1/8 of 1% e.g., shall be stated in three (3) decimal requirement for yields of 13.125%. places. submitted tenders. Non-competitive tenders shall be accepted at the weighted average yield of the accepted competitive tenders. (as No provision. Transposed to last sentence amended by Department Order No. 74-98, of proposed Section 26. Series of 1998, dated 27 October 1998) Section 11. Receipt and Processing of Section 23. Receipt and Processing of Tenders by the Bureau of the Treasury. Tenders. - Tenders for Government Tenders transmitted through the Bureau Securities electronically transmitted of the Treasury, prior to the cut-off time by accredited buyers through the fixed under Section 10 hereof, for the Auction System prior to the cut-off receipt of tenders shall automatically be time fixed for the receipt of tenders acknowledged by the ADAPS or stamped shall automatically be acknowledged with the time-dated clock by the by BTr through the Auction System. Securities Origination Division-Bureau of In case of any downtime of the the Treasury (SOD BTr), as the case Auction System, tenders for may be. Neither the Department of Government Securities shall be Finance nor the Bureau of the Treasury submitted in the prescribed tender shall bear any liability whatsoever for form within the prescribed cut-off Substantially the same. any errors in tenders received or for time and manually stamped in the delays in the transmission of tenders. time-dated receiving system by the (as amended by Department Order Securities Origination Division of BTr. No. 74-98, Series of 1998, dated 27 The BTr shall not be liable for any October 1998) errors in tenders received or for delays in the transmission of tenders beyond the prescribed cut-off period for submission and receipt of tenders. All tenders received on time shall be Section 24. Auction Committee. Duly authorized deliberated upon immediately after the All tenders received on time shall be representative of Deputy cutoff time set by the Auction deliberated upon immediately after Treasurer of the Philippines Committee composed of the Secretary the cut-off time set by the Auction for Operations included. BSP of Finance or any representative Committee composed of the Secretary Treasury Department designated by him/her, as of Finance, as Chairperson; the represented by it Head or a Chairperson; the Treasurer of the Treasurer of the Philippines as Vice duly authorized Philippines as Vice Chairperson; the Chairperson; the Assistant Secretary representative. SEC Assistant Secretary for the Domestic for the Domestic Finance Group of representative updated from Finance Group of the Department of the Department of Finance or duly Director of Brokers and Finance as Member; the Deputy Treasurer authorized representative as Exchanges Department to of the Philippines for Operations as Member; the Deputy Treasurer of Market Regulation Member; the Deputy Governor for the the Philippines for Operations or duly Department. Banking Services Sector, Research and authorized representative as Member; Treasury of the Bangko Sentral ng the Deputy Governor for the Banking Pilipinas or his/her authorized Services Sector, Research and representative, as Member; the Director Treasury of the BSP or duly authorized of the Treasury Department of the representative, as Member; the Head Bangko Sentral ng Pilipinas as Member; of the Treasury Department of the and the Director of the Brokers and BSP or duly authorized representative, Exchange Department of the Securities as Member; and the Director of the and Exchange Commission or his/her duly Market Regulation Department of the authorized representative as Member. SEC or duly authorized representative, At least four (4) members shall as Member. constitute a quorum to do business. The Deputy Treasurer of the Philippines for Operations shall also act as the Executive Officer. The Auction Committee staff support shall be provided by the appropriate division of the Bureau of the Treasury. Third to the last sentence of preceding At least four (4) members of the paragraph. Auction Committee shall constitute a quorum to do business. Second to the last sentence of the second The Deputy Treasurer of the Philippines paragraph. for Operations shall also act as the Executive Officer of the Auction Committee. The Secretary of Finance may designate The Secretary of Finance may designate an additional member(s) in the Auction an additional member(s) in the Auction Committee as he may deem appropriate. Committee as he may deem appropriate. No revision. (As amended by Department Order No. 3-01, Series of 2001 dated 26 February 2001 and Department Order No. 25-04, Series of 2004, dated 30 July 2004). (Last sentence of 2nd paragraph of this The Auction Committee staff support provision in the current Department Order) shall be provided by the appropriate division of BTr. Section 12. Award by the Auction Section 25. Award for Tenders. Deleted reference to non- Committee. The Auction Committee The Auction Committee shall make a GSEDs. The Executive Officer shall make a decision as to the amount decision as to the amount and rate of is the person designated to and rate of the awards. Such decision the awards. Such decision shall be confirm the transmitted shall be transmitted to the winning GSEDs/ transmitted immediately to the decision. And the Vice Non-GSEDs through the Bureau of the winning accredited buyers through Chairman is the person Treasury's ADAPS/BTr's SOD the Auction System, except on any designated to download the immediately after a Committee decision is downtime of the Auction System in confirmed and awarded confirmed. A member of the Auction which case the decision of the Auction Government Securities to the Committee shall be assigned to confirm Committee shall be transmitted primary securities account the transmitted decision. The Auction manually in the prescribed notice of in ROSS, subject to receipt of Committee shall then download the award form of BTr. The Executive auction proceeds. awarded securities to the winning bidders' Officer of the Auction Committee or Principal Securities Account in the RoSS. duly authorized representative shall A member of the Auction Committee confirm the transmitted decision. The shall likewise be designated to confirm Vice Chairman shall authorize the the downloaded information. Thereafter, posting of the confirmed and awarded the Auction Committee shall sign a Government Securities to the winning print-out of the auction results summary. accredited buyer's Primary Securities (As amended by Department Order No. Account in RoSS, subject to receipt 74-98, Series of 1998, dated 27 of auction proceeds. A print-out of October 1998). the auction results summary shall be signed by the members of the Auction Committee. Section 13. Apportionment of Awards Section 26. Apportionment of Awards and Reservation of Right. Unless and Reservation of Right. Unless otherwise as may be provided by the otherwise provided in the public Secretary of Finance, the lowest rate notice of offering by the Secretary offered by competitive bidders will be of Finance through BTr, the lowest accepted in full down to the amount rate offered by bidders for Competitive required after deducting the total Bids will be accepted in full down to the amount of non-competitive bids from amount required after deducting the the total amount of issue(s). At cut-off amount of Non-Competitive Bids from level, if the same rate appears in two the total amount of issue(s). At cut-off (2) or more tenders, and it is necessary level, if the same rate appears in two Substantially the same. The to accept only part of the amount offered (2) or more Competitive Bids or last sentence was transposed at such rate, the amount accepted at Tenders, and it is necessary to from the last paragraph of the such rate shall be prorated in accept only part of the amount current Section 10. accordance with the respective amounts offered at such rate, the amount applied for. If the amount is the same, accepted at such rate shall be the proration of odd amount is applied prorated in accordance with the randomly. The rate of non-competitive respective amounts applied for. If the bids shall be reckoned from the average amount is the same, the proration of the rates tendered by accepted of odd amount shall be applied in competitive bids. accordance with the terms and conditions as stated in the public notice of offering. Non-Competitive Bids or Tenders shall be accepted at the weighted average yield of the accepted Competitive Bids or Tenders. The Auction Committee reserves the right to The Auction Committee reserves the accept or reject any or all tenders or parts right to accept or reject any or all of the tenders and to award less than tenders or parts of the tenders and No revision. the amount applied for and any action it to award less than the amount may take shall be final. (As amended by applied for and any action it may Department Order No. 32-98, Series of take shall be final. 1998, March 13, 1998) Section 14. Payment of Awards. Section 27. Payment of Awards. The proposed section is to Payment on awarded issues must be made Payment on awarded issues shall provide flexibility on or completed on Wednesday for Treasury be made or completed in accordance settlement of payment for Bills and Thursday for Treasury Bonds. In with the prescribed settlement cut-off awards and clarifies the event of a holiday or fortuitous event, time of BTr. In the event of a national settlement convention in case the settlement shall be adjusted and or local holiday or fortuitous event of holidays or fortuitous dealers notified accordingly. when no settlement of the events taking place on Government Securities and/or cash settlement date. can be effected, the settlement date shall be adjusted to the next business day. Due notice shall be issued by BTr through the Auction System, or in the prescribed notice form of BTr in case of any downtime of the Auction System. On settlement date, the concerned On settlement date, BTr shall instruct GSED/Non-GSED shall instruct Bangko the debiting of the winning accredited Sentral ng Pilipinas (BSP) to debit their buyer's Settlement Bank account and Demand Deposit Account and credit the the crediting of the deposit account Removed reference to non- Demand Deposit Account of the of the Treasurer of the Philippines GSED as participants in the Treasurer of the Philippines maintained under Section 47 of this Order. auction, adopting instead the with the Bangko Sentral ng Pilipinas, reference to "accredited which in turn, shall send a credit advice buyers". to the Bureau of the Treasury. (As amended by Department Order No. 74-98, Series of 1998, dated 27 October 1998) Section 30. Award. Subject to the provisions of Chapter III hereof, the Bureau of the Treasury, having accepted This provision was dropped in tender(s) for Treasury Bills and Bonds the proposed D.O. which are not represented by a physical considering that BTr has certificate, shall make the award through No provision. already assumed the registry Bangko Sentral ng Pilipinas until such function. time RoSS can assume the responsibility, which shall transfer the Treasuries to the bidder(s) in accordance with Section 32 below. (As amended by DOF Order No. 32-98, Series of 1998, March 13, 1998) B. Over-the-Counter Part 2 OVER-THE-COUNTER METHOD (Definition in current Section 15 is Section 28. Terms of reproduced in the Definition of Terms Over-the-Counter Sale of Government portion of this matrix, to compare Securities. The BTr shall issue a New. Issuance of GS through the same against the proposed public notice of offering prescribing OTC method shall be definition under the Draft the terms and conditions for the preceded by a public notice amendments.) over-the-counter origination or sale which shall prescribe the of Government Securities. terms and conditions. Section 16. Authority to Sell This provision was dropped Over-the-Counter. With the approval No provision. as the same is already in of the President of the Philippines, the Section 2 of the proposed Secretary of Finance, may after consultation D.O. (Powers of the Secretary with the Monetary Board, authorize the of Finance). over-the-counter sale of Government Securities subject to the terms and conditions as may be prescribed by the Secretary of Finance. Section 17. * Scope. Idle funds in excess Section 29. Allowable Funds; Scope of normal operating requirements, as of Investment. GOCCs and LGUs hereinafter defined, of GOCCs and LGUS shall be allowed to purchase shall be invested in medium-term and Government Securities using investible longterm government securities, special funds or idle funds in excess of normal short term government securities and/or operating requirements in the case fixed term deposits with the Bureau of the of LGUS. The phrase "idle funds in Treasury. The phrase "idle funds in excess of normal operating excess of normal operating requirements" requirements" shall generally mean Deleted reference to medium shall generally mean the level of funds the level of funds which an entity can term, long term, special short which an entity can freely invest in freely invest in Government Securities term GS and fixed term government securities and/or fixed term after considering provisions for deposits, but maintained the deposits after considering provisions coverage of such (1) regular and requirement that only for coverage of such (1) regular and recurring operating expenses such as investible funds or idle funds recurring operating expenses such as salaries and wages, repairs and in excess of normal operating salaries and wages, repairs and maintenance, inventories and supplies, requirements, may be maintenance, inventories and supplies, debt servicing, etc. within the context invested in GS by GOCCs debt servicing, etc. within the context of the entity's cash operating cycle; and LGUs. of the entity's cash operating cycle; and and (2) local counterpart commitments (2) local counterpart commitments for for capital expenditures within the capital expenditures within the current current fiscal year. In case of LGUs, fiscal year. In case of LGUS, unremitted unremitted national collections and national collections and funds set aside funds set aside for payments of for payments of obligations to obligations to government government corporations/cooperatives corporations/cooperatives shall not shall not form part of their idle funds. form part of their idle funds. (b) Current holdings of Treasury Bills of GOCCs/TEIs, except the amounts The provision was dropped as needed for operations, shall be converted, the GOCCs and LGUs are no through the Securities Origination Division, No provision. longer required to convert Bureau of the Treasury, into medium-term their holdings as prescribed and long-term government securities, under the current provision. special short-term government securities, and/or fixed term deposits as and when they mature; (c) Newly, internally-generated excess New and internally-generated excess funds, i.e., funds which have not been funds of GOCCs, i.e., funds which Deleted limitation on previously invested in government have not been previously invested in investment outlets of GOCCs securities nor sourced from equity or Government Securities nor sourced and TEIs. subsidy from the national government, from equity or subsidy from the National of GOCCs/TEIs, at their option, may be Government may also be invested in invested into special 364-day Treasury Government Securities. Bills, Special Treasury Bonds and/or fixed term deposits; (d) Temporary idle funds of LGUs shall be Temporary idle funds of LGUs qualifying invested in medium-term/long term as local counterpart commitments for government securities as may be allowed capital expenditures within the current by their cash requirements, and provided fiscal year may also be invested in that such investments will not delay the Government Securities as may be Deleted limitation on implementation of its projects. (Department allowed by their cash requirements, investment outlets of Order No. 81-96, Series of 1996, and provided that such investments LGUs. June 10, 1996) will not delay the implementation of covered projects. Section 18. OTC Investment. GOCCs/ Section 30. Form and Cut-off Time. TEIs/LGUs placements shall be phoned in Placements of GOCCs, LGUs, and Deleted certain operational or faxed to the Securities Origination TEIs shall be transmitted to BTr details to allow greater Division, Liability Management Service, (Attention: Securities Origination flexibility. Bureau of the Treasury on or before Division, Liability Management 11:00 A.M., Monday to Friday. Service) in the prescribed placement forms and in accordance with such time as may be prescribed by BTr. Placements may be submitted in hard copy or via facsimile or any other mode of transmission acceptable to New. This provision is the BTr. The BTr may lawfully rely added to provide a cover to and execute such placement the BTr for effecting a No provision. instruction within the settlement settlement instruction from cut-off time for settlement payment the GOCC/LGU/TEI with the Settlement Bank. The BTr concerned. shall not be liable for damages or losses on the GOCC, LGU or TEI for effecting settlement payment instructions. On or before 4:00 P.M., on the day of On or before 4:00 P.M. on the day placement, investing GOCCs/TEIs/LGUs of placement, the GOCCs /LGUs/TEIs shall send a written confirmation of shall submit the duly executed placement, in duplicate, to the Bureau placement form, in duplicate, to BTr of the Treasury, which, in turn, shall (Attention: Securities Origination Substantially the same. accomplish the lower portion of which Division, Liability Management and return a copy of the same to Service). Submitted placements of concerned GOCCs/TEIs/LGUs. GOCCs, LGUs and TEIs shall be (Department Order No. 81-96, acknowledged by BTr (Securities Series of 1996, June 10, 1996) Origination Division, Liability Management Service). Section 19. GOCCs Placement. (a) (See Definition of Terms) See remarks in the relevant (provides definition of GOCC - hence, is section. reproduced in the Definition of Terms portion of this matrix, for comparative purposes) Section 31. Pricing of Placements. Pricing of Government Securities offered or issued to GOCCs, LGUs and TEIs shall be as prescribed by BTr. (b) The applicable yield rates for Treasury Bills issued to GOCCs shall be at a uniform rate equivalent to the lowest accepted yield rate of the immediately preceding Treasury Bills auction, subject to the confirmation by the Secretary of Finance that the rate is acceptable to him. (As amended by Department Order No. 74-98, Series of 1998, dated Pricing conventions for 27 October 1998) GOCCs/LGUs/TEIs will be in accordance with BTr's pricing (c) Treasury Bonds issued to GOCCs shall guidelines, to allow greater be priced based on the current market yield. flexibility. The applicable coupon rate shall be based or the rate corresponding to the auctioned No provision. Treasury Bonds, subject to the confirmation by the Secretary of Finance. (As amended by Department Order No. 74-98, Series of 1998, dated 27 October 1998) Section 20. TEIs Placement. (a) Prior to Section 32. Specific Requirements Clarifies that these the actual over-the-counter purchase of for TEI Accounts. A TEI or its requirements are only upon government securities, the TEI or the managing bank/financial institution account opening, with tax managing bank and financial institution shall: exempt status. shall: 1. Submit to the Securities (a) To open a tax-exempt RoSS Origination Division, Liability Management securities account, submit to Service a (i) Certified copy of current the Securities Origination ruling (not more than a year) from the Division, Liability Management Bureau of Internal Revenue regarding Service a (i) Certified copy of its status as a tax-exempt institution; current ruling (not more than a (ii) Copy of the Board Resolution duly year) from the Bureau of certified by the Corporate Secretary Internal Revenue regarding its authorizing the placement (directly for status as a tax-exempt managed funds or indirectly through institution; (ii) Copy of the Clarified that the Board designated trustee bank/financial Board Resolution or as Resolution requirement could institution in the case of managed embodied in the Secretary's be complied with by trust funds) in government securities; Certificate duly certified by the presentation of a Secretary's and (iii) Copy of the covering trust Corporate Secretary authorizing Certificate which embodies agreement; and the placement (directly for the board action. managed funds or indirectly through designated trustee bank/financial institution in the case of managed trust funds) in Government Securities; and (iii) Copy of the covering trust agreement; and 2. Perform all acts and undertaking (b) Perform all acts and undertaking connected therewith including the connected therewith including designation of person(s) authorized the designation of person(s) No revision. to exercise such functions. authorized to exercise such functions. (b) Minimum amount of placement of Section 33. Amount of Placements. Formalizes existing minimum TEIs shall be in P1.0 Million and in even The minimum amount of placement placement for GOCCs and multiple of P100,000.00. shall be P500,000 for GOCCs and LGUs. No revision for TEIs. LGUs, and P1.0 Million for TEIs, and in even multiples of P100,000.00 in any case. (c) Treasury Bills issued to TEIs shall be priced at a discount based on 90% of the weighted average interest rate of the immediately preceding regular weekly auction applicable to corresponding Treasury Bills. (d) Treasury Bonds issued to TEIs shall be priced based on the current market yield with a coupon rate based on the 90% of the coupon rate applicable to the corresponding auctioned Treasury Bonds. Interest shall be payable semi-annually in These matters shall be arrears based on 360-days a year covered by implementing consisting of 12 months of 30 days circulars to be issued by the each. (As amended by Department BTr which will prescribe the Order No. 32-98, Series of pricing convention for 1998, March 13, 1998) GOCCs/LGUs/TEIs. Note that the proposed Section 31 Section 21. LGUs Placement. No provision. states that these pricing (a) The applicable yield rates for conventions are to be Treasury Bills issued to LGUs shall prescribed by the BTr. be at a uniform rate equivalent to the weighted average yield rate (WAYR) of the immediately preceding Treasury Bills auction, subject to confirmation by the Secretary of Finance that the rate is acceptable to him. (b) Treasury Bonds issued to LGUs shall be priced based on the current market yield. The applicable coupon rate shall be based on the rate corresponding to the auctioned Treasury Bonds, subject to the confirmation by the Secretary of Finance. (As amended by Department Order No. 74-98, Series of 1998, dated 27 October 1998) Section 22. Settlement. Settlement of Section 34. Settlement of GOCC, GOCCs/TEIs/LGUs OTC investment shall LGU and TEI Placement. be on the same day as placement date. Settlement of GOCC, LGU and TEI No substantial change. over-the-counter placement shall be on the same day as placement date. Upon placement/maturity of government Upon placement/maturity of Removed language referring securities, the Bureau of the Treasury, Government Securities, BTr RoSS to assumption of registry pending assumption of responsibility by shall credit/debit the concerned function by RoSS as the RoSS, shall credit/debit concerned GOCC/LGU/TEI RoSS Primary same is already in place. GOCCs/LGUs/TEIs Securities Account Securities Account. maintained in the book-entry of the Bureau of the Treasury. Simultaneously, the Settlement Bank shall correspondingly debit/credit the GOCCs/LGUs/TEIs Cash Account and credit/debit TOP's Account with the Settlement Bank. (As amended by Department Order No. 32-98, Series of 1998, March 13, 1998) (See last sentence of immediately Simultaneously, the Settlement Bank preceding item.) shall correspondingly debit/credit the No revision. GOCCs/LGUs/TEIs Cash Account and credit/debit TOP's Account with the Settlement Bank. Section 23. Evidence of Ownership. Section 35. Proof of Treasury Bills and Treasury Bonds shall Over-the-Counter Placement. be evidenced by the Bureau of the Government Securities placement No substantial change. Treasury's acknowledgement of the of GOCCs, LGUs or TEIs shall be placement. (Department Order No. 81-96, evidenced by the acknowledgment of Series of 1996, June 10, 1996) the placement in the executed placement document. Section 24. Transfer. GOCCs/LGUs Section 36. Transfers. Government may sell their government securities prior Securities held by GOCCs, LGUs and to maturity only with GOCCs/LGUs TEIs may be transferred prior to which maintain Securities Account in the maturity to any person, regardless of book-entry of the Bureau of the tax classification, in any BTr-accredited Treasury or subsequently in RoSS. In GSTM. the same manner, TEIs may sell their government securities prior to maturity only to TEIs which maintain Securities Account in the book-entry of the Bureau This provision puts in place of the Treasury or subsequently in the tax-neutral trading and RoSS. settlement environment for Government Securities, to Transfer from a GOCC/LGU allow all holders of GS to to authorized GOCC/LGU shall be freely transact with one effected by an appropriate book-entry another regardless of tax in the Bureau of Treasury or subsequently classification provided the in RoSS. (As amended by Department GSTM has tax tracking Order No. 32-98, Series of 1998, facilities. March 13, 1998) Section 25. Pledge. Pledge of No provision. government securities issued to GOCCs/TEIs/LGUs shall be deemed constituted when the Bureau of the Treasury, pending assumption of responsibility of RoSS, certifies by book-entry that the government securities have been segregated and earmarked in favor of the pledgee. (As amended by Department Order No. 32-98, Series of 1998, March 13, 1998) C. Tap Method. Part 3 TAP METHOD Renumbered for consistency with the numbering methodology in the proposal. Section 26. Definition. (Definition in Definition in current Section current Section 26 is reproduced in the 26 is reproduced in the Definition of Terms portion of this matrix, Definition of Terms portion of to compare the same against the this matrix, to compare the proposed definition under the Draft same against the proposed amendments.) definition under the Draft amendments. However, the newly established SMALL Reference to the Small INVESTOR'S PROGRAM (SIP) shall be No provision. Investors Program was open to SEC licensees and accredited deleted as the same has agents of the BTr, not necessarily GSEDs. been absorbed in the BTr's (As amended by Department Order No. Retail Treasury Bond 74-98, Series of 1998, dated Program. 27 October 1998) Section 27. Authority to Sell other than Section 37. Participants. The tap through Auction and through Negotiation. facility shall be available to Market As an additional window for Treasury Bills Makers, BTr-Managed Funds and and Bonds, the sale through tap method other entities or instrumentalities as is hereby adopted under the following may be allowed by the Secretary of Modified the participants to terms and condition: Finance or through BTr. only Market Makers, and expanded to include a. The tap window may be accessed BTr-Managed Funds and by GSEDs/Fis from Monday through other entities or Friday. Likewise, in the case of the instrumentalities as may be Small Investor's Program (SIP), the allowed by the Secretary of window may be accessed from Finance, through BTr. Monday through Friday subject to settlement on the day of placement. b. The issue ceiling, yield and amount Section 38. Methods of issuance and for Treasury Bills and Bonds available on Features of GS issued under Tap. tap shall be as announced or as Primary origination or sale of negotiated by the Bureau of the Treasury. Government Securities through tap (As amended by Department Order No. shall be announced through a public Substantially the same. 15-99, Series of 1999, dated notice of offering. The issue ceiling, January 12, 1999) yield and amount for Government Securities available on tap shall be as announced or as negotiated by BTr. No provision. Article III New. Heading added for SECONDARY MARKET FOR better organization of the GOVERNMENT SECURITIES document. Part 1 GENERAL PROVISIONS Section 39. Secondary Market New. This provision Transfers. Transfers of emphasizes that secondary Government Securities in a BTr- market activities are covered accredited GSTM shall be governed by the Department order, as by this Order and the applicable rules well as SEC regulations. and regulations issued by the Secretary of Finance through BTr, the rules and regulations of the SEC and the rules and conventions of such BTr-accredited GSTM. Section 40. Transfers Across Tax New. This provision sets forth Categories. Transfers of the tax-neutral trading and Government Securities between settlement environment, market participants shall be under which entities of allowed regardless of tax status, different tax classifications subject to the rules and regulations can transfer between and to be issued by BTr to ensure among each other, subject to the proper assessment and rules and regulations to be collection of taxes. issued by the BTr. Section 41. Accreditation of Secondary Market Participants. The BTr shall promulgate the appropriate rules and regulations New. This provision sets forth to classify and accredit the responsibility of the BTr to participants in the secondary accredit and classify GS market of Government Securities market participants on the based on their activities therein basis of their commitments to and their participation in a the issue. Government Securities Trading Market. The participants that may be allowed are Market Makers, Dealers and Brokers. Notwithstanding the foregoing, the Secretary of Finance through BTr shall have the power, in accordance with No provision. this Order, to further and additionally classify and accredit participants in the New. Notwithstanding the secondary market, prescribe preceding paragraph, the standards and qualifications Secretary of Finance retains defined by it for such residual oversight powers classifications, establish a over the secondary market hierarchy of market participants and its participants, under based on their commitment Section 4 of R.A. No. 245. to the Government Securities market, including incentives to ensure accredited participants' ability to support its commitments to the Government Securities market and enhance liquidity in the secondary market. The BTr shall prescribe mechanisms to monitor compliance with commitments and take such actions New. This provision is as are necessary to enforce the necessary and incidental to classification system, including the accreditation powers of suspension/revocation of the BTr, to implement and incentives, suspension/revocation enforce the same. of the accreditations granted and such other actions necessary and incidental hereto to protect the Republic of the Philippines and the investing public from fraud or loss. Section 42. Special Covenants of all Accredited Secondary Market Participants. All accredited participants, by application for New. This provision is any such accreditation of whatever necessary and incidental to classification, are deemed to have the accreditation powers of given consent to the disclosure the BTr, to implement and to BTr of their activity in the enforce the same. Government Securities market by a GSTM. No other written consent shall be deemed necessary to give effect hereto, other than the accreditation granted by BTr under this Order and implementing issuances issued by BTr in relation hereto. Part 2 New. Heading added for GS TRADING MARKET better organization of the ACCREDITATION STANDARDS document. Section 43. Market Structure. The Secretary of Finance through BTr New. This provision is to may accredit any trading market as recognize the non-exclusive a GSTM; provided, the GSTM is nature of a trading market that duly recognized by the SEC under may be accredited as a applicable law, rules and regulations. GSTM. Section 44. Documentation. A GSTM shall be accredited as such New. This provision sets No provision. by BTr through a Listing Agreement forth the operational or other appropriate document documentation prior to showing BTr's consent to have accreditation of the GSTM. Government Securities traded and settled on such GSTM. Section 45. GSTM Rules. The New. This provision requires GSTM shall adopt such rules and the GSTM to prescribe the conventions as are necessary to rules and regulations for the give effect to its obligations under participants in that trading its accreditation. market. Section 46. Minimum Requirements for GSTM. A GSTM shall comply New. The issuer is interested with the following minimum in ensuring that all GSTMs requirements to be qualified for are aligned in their service to accreditation: the issue, providing services at par with one another, so I. GS Trading Market Facilities. that all investors in government securities enjoy a. Transaction Modes. The the same rights and benefits GSTM shall allow negotiated regardless of their chosen transactions and/or automatic market. The issuer should be matching processes, or any able to exercise a prerogative other transaction modes as of setting down minimum may be notified to the BTr. standards for its secondary market, and impose a b. Retail Market Structure. The requirement that all market GSTM shall allow retail providers should be capable investors to participate therein of providing this minimum. in accordance with relevant regulation and at the trading lots prescribed by BTr. c. Accessibility. The GSTM shall be accessible as much as possible on a nationwide basis. The GSTM shall be deemed to be in compliance herewith where regional or key cities in provincial areas are capable of accessing the trading system directly. d. Regulatory environment. The GSTM shall be under the oversight of a Self-Regulatory Organization (SRO) duly recognized as such by the Securities and Exchange Commission, with rulemaking No provision. and enforcement powers, and independent compliance and surveillance functions as required under the Securities Regulation Code or its successor law. I. * GSTM Participants. The GSTM shall include the participation of brokering entities, dealing entities and qualified investors. II. Monitoring Facilities on Market Participants. The GSTM shall have facilities required to monitor and report on the secondary market performance of GS Market Participants accredited by BTr, based on performance criteria prescribed by BTr. III. Price Transparency. The GSTM shall have price transparency mechanisms consisting of public dissemination facilities that capture transaction data and disseminate the same in accordance with timeliness standards under applicable regulation. IV. Liquidity Facilities for Failed Trades Management and to Support Trading Activities a. Cash Liquidity Programs. The GSTM shall operate programs that seek to address cash liquidity concerns of its participants, which shall serve as part of the GSTM's failed trades management activities. Such cash liquidity programs shall have the following essential features: (1) SRO. Cash Liquidity Programs shall be under the oversight of a duly registered Self-Regulatory Organization (SRO); provided, however, that the SRO may exempt certain entities or activities from its SRO oversight with concurrence of the SEC. (2) Risk Mitigation Mechanisms. Cash Liquidity Programs shall have in place mechanisms that mitigate risks, such No provision. as, but not limited to, collateralization of transactions. (3) Collateral Administration and Management. Cash Liquidity Programs shall include the participation of an entity that shall take delivery of collateral with the task of monitoring and acting to maintain collateral levels at agreed upon levels and conduct resolutions processes. (4) Regulatory Approval. Such Cash Liquidity Programs must be approved by the relevant regulatory authorities having jurisdiction over the GSTM and the participants contemplated. b. Securities Liquidity Programs. The GSTM shall operate programs that seek to address securities liquidity concerns of its participants, which shall serve as part of the GSTM's support for the trading activities of its participants. Such securities liquidity programs shall have the following essential features: (1) SRO. The Securities Liquidity Program shall be under the oversight of a duly registered Self-Regulatory Organization (SRO); provided, however, That the SRO may exempt certain entities or activities from its SRO oversight with concurrence of the SEC. (2) Risk Mitigation Mechanisms. Securities Liquidity Programs shall have in place mechanisms that mitigate risks, such as, but not limited to, collateralization of transactions. (3) Collateral Administration No provision. and Management. Securities Liquidity Programs shall include the participation of an entity that shall take delivery of collateral with the task of monitoring and acting to maintain collateral levels at agreed upon levels and conduct resolutions processes. (4) Regulatory Concurrence. Such Securities Liquidity Program shall have been approved by the relevant regulatory authorities having jurisdiction over the GSTM and the participants contemplated. V. Trading Programs that Promote Equality of Access. The BTr shall establish trading programs that enhance market access and allow equality of access by its participants, which Programs shall be implemented through the GSTMs accredited by it. The GSTM shall provide facilities to ensure that counterparty risks are sufficiently mitigated through the use of bilateral counterparty limits, margin-based trading limits, pre-delivery and such other mechanisms to mitigate counterparty risk. VI. Settlement Standards. The GSTM shall observe the following settlement standards: a. Straight-Through Process. The GSTM shall provide for settlement on a straight-through process mode, to ensure minimization of operational inefficiencies. b. Delivery-versus-Payment. The GSTM shall settle trades conducted on its systems on a delivery-versus-payment (DvP) mode. Such settlement may allow investors to settle directly into their cash and/or securities accounts. c. Clearing Authority. The GSTM shall ensure that its clearing No provision. and settlement processes use intermediaries that are authorized by the Securities and Exchange Commission to perform the clearing and settlement process of the GSTM. VII. Other Capabilities. The GSTM shall likewise have the following capabilities. a. Business Continuity Plan (BCP) and Disaster Recovery Program (DRP) Requirements. The GSTM shall provide BTr a copy of its DRP and BCP. b. Ability and Undertaking to Link with Existing Markets and Payment Systems. All GSTMs shall have the capability to link with existing GSTMs and payment systems. c. Electronic Interface. All GSTMs shall have automated interface with the RoSS. VI. MISCELLANEOUS ARTICLE IV Renumbered Heading, for MISCELLANEOUS consistency with the numbering methodology of the proposal. Section 38. Demand Deposit Account. Section 47. Deposit Account. The Replaced "Treasury Bills and The Treasurer of the Philippines maintains Treasurer of the Philippines shall Bonds" with "Government a Demand Deposit Account with the maintain a deposit account with the Securities" and added a Bangko Sentral ng Pilipinas to which Bangko Sentral ng Pilipinas or reference to RA No. 1000. all proceeds from the sale of Treasury authorized government depository The "Demand Deposit Bills and Bonds under R.A. No. 245, as bank to which all proceeds from Account" has been replaced amended, shall be credited and all the sale of Government Securities with "Deposit Account" to payments for redemption of Treasury under R.A. No. 245, as amended, cover multi-currency GS. Also Bills and Bonds shall be charged. and R.A. No. 1000, as amended, included payment of interest shall be credited and all payments in the final sentence, for for interest and redemption of completeness of coverage. Government Securities shall be charged. Section 39. Reservation as to Section 48. Reservation as to Terms Terms of these Rules and of these Rules and Regulations. Regulations. The Secretary of The Secretary of Finance reserves No revision. Finance reserves the right to amend, the right to amend, supplement, revise, supplement, revise, prescribe or prescribe or withdraw all or any of the withdraw all or any of the provisions provisions of these rules and of these rules and regulations at any regulations at any time, or from time, or from time to time. time to time. Section 40. Inconsistent Circulars, Section 49. Inconsistent Circulars, Memoranda and Orders. All Memoranda, and Orders. This circulars, memoranda or orders Order expressly supersedes and This provision provides for an inconsistent herewith are hereby revoked repeals Department Order No. express repeal of Department or modified accordingly. 141-95, as amended. All circulars, Order 141-95, for clarity. memoranda or orders inconsistent herewith are hereby revoked or modified accordingly. Section 41. Transitory Provision. The Section 50. Transitory Provision. CBP/BSP accreditation of government The BTr is hereby authorized to This provision is to provide for securities dealers shall be valid up to 30 implement the requirements of this time for both the BTr and the June 1996, thereafter, the rules and Order in such manner deemed market participants to adjust regulations embodied in this Circular, appropriate under the circumstances, to the requirements as specifically Sections 36 and 37, shall and shall further prescribe the prescribed in the proposed govern the eligibility of securities dealers transitory provisions necessary to Department Order. The to participate in the auction. Therefore, ensure a smooth transition from the issuance of implementing all interested securities dealers shall present state of the Government circulars will require a submit to the Bureau of the Treasury Securities market to the environment consultation period and the documentation requirements of contemplated under this Order. process with the market as Section 36 hereof not later than 30 well as a determination of April 1996. Acknowledgment by BTr their readiness to adapt to the means eligibility to bid. new regime. Section 42. Effectivity of this Section 51. Effectivity. These No substantial changes. Regulation. These revised rules Omnibus Revised Rules and and regulations shall take effect Regulations shall take effect immediately. immediately. EXECUTIVE SUMMARY OF THE PROPOSED REVISIONS TO DEPARTMENT ORDER 141-95 Changes in Form The proposed Department Order introduces several style changes that are aimed at easing interpretation of the language and intent of the Order. In particular, these style changes involve: (a) addition of a substantial preamble that sets forth the legal basis and purpose of the Order; (b) addition of a section on definition of terms to ensure consistency of interpretation of terminology frequently used in the Order; (c) rational organization of the provisions under headings that group related matters together; and (d) deletion of language that provided operational details for the implementation of the provisions of the Order to ensure appropriate flexibility in operationalizing the Order. Where possible, language was introduced to ensure that the scope of the proposed Order could cover locally issued foreign currency-denominated Government Securities. Note on the Preamble. The proposed Department Order opens with a preamble that provides the background for the revisions, and the policy and environmental justifications therefor, mapping the same out against the general mandate of the Secretary of Finance under applicable laws, specifically Republic Act Nos. 245 and 1000. Specific mention is made of the following important underlying policy considerations for the Order: (a) To lift current transactional barriers that should not impede liquidity, since advances in technology and law have already been made. In particular, technological advances allow recording of ownership down to the level of beneficial ownership and tracking of taxes despite transactions that cross tax classes. These have already been used to support trading and settlement for US dollar tranches of the recently issued Multicurrency Retail Treasury Bonds. Furthermore, legal and regulatory frameworks now recognize the electronic recording of beneficial ownership and require delivery of securities bought to beneficial owners or their agents. As such, the tracking can be put in place to ease transfer restrictions that are present in the current DO 141-95. DHaEAS (b) The establishment of an orderly environment and appropriate oversight over the secondary market for Government Securities. The proposed Order sets forth a regulatory structure that is consistent with relevant laws, rules and regulations which now require the existence of organized secondary markets under the regulatory oversight of the Securities and Exchange Commission, even for securities which are exempt under the Securities Regulation Code, such as Government Securities, to protect the Republic of the Philippines and the investing public from fraud or loss. (c) Investor protection. Investor protection dictates that all investors in GS should be able to enjoy parity of liquidity and secondary market facilities in any secondary market structure where such investor is serviced. Changes in Substance (1) General Provisions: a. Taxation (Section 10 of the proposed Order, Section 8 of the current Order). The current provision has been enhanced to clarify the tax regime for the outright spot market, essentially reproducing the current provision, but neutralizing language that was overly particular that could become unresponsive to changes in law and regulation. In particular, the tax rate of 20% final tax on coupons provided for in the current Department Order was made broad to refer to "applicable final tax rate under the National Internal Revenue Code" to allow for changes in the tax laws or application of treaty rates. Moreover, additional language was introduced to implement tax provisions in tax laws and regulations regarding securities lending transactions and repurchase agreements. b. Sub-Registry (Section 13 of the proposed Order and in the Definition of Terms, no provision in the current Order). The definition of the registry now encompasses a BTr-accredited sub-registry. The qualifications and functions are provided for in the Order. In line with the policy to ensure a safe and efficient secondary market structure for debt issuances of the National Government, there is a need to recognize varied modalities of infrastructure support that could enhance our markets. An important initiative of the Bureau of the Treasury is the neutralization of the secondary market environment of its issues, to allow holders of government securities of different tax classes to transact between and among each other, while preserving the tax regime for the issue under tax laws. Advancements in technology have enhanced registry corporate action systems which are now capable of supporting a tax-neutral secondary market for debt issues. These systems can be engaged by the registry, considering the benefits these could provide to the government securities market, in terms of liquidity, settlement, and potential for growth. BTr's RoSS sub-registry is functioning as such for non-peso denominated government issues, and is capable of likewise servicing the peso-GS market. The dollar tranches of the recently issued Multicurrency Retail Treasury Bonds are already traded and settled in a tax-neutral environment. Neutralizing the tax environment will allow the government issue to be geared and prepared towards regionalization, which is part of the government's goals in the foreseeable future. DTIcSH c. Tax-Unification (Section 36 of the proposed Order, Section 24 of the current Order; also Section 40 of the proposed Order, no parallel provision in the current Order). The proposed Order allows the transfer of Government Securities between and among all holders of Government Securities at any time prior to maturity, regardless of tax classification, in a BTr-accredited GS Trading Market which is required under the Order to have a tax tracking capability. This puts in place the tax-neutral trading and settlement environment for Government Securities, which will allow enhanced liquidity and depth in the GS market and prepare the Government issue for regionalization efforts. (2) Primary Market Provisions: a. OTC Method (Definition 20 in the proposed Order) . The BTr is empowered to allow other types of entities to be engaged in the primary or origination sale of GS through the OTC method, where this is currently limited to GOCCs, LGUs and TEIs under the current Order. b. Settlement Bank (Definition 24 in the proposed Order) . Settlement Banks for primary market purchases, receipt of coupon and/or redemption payments of Government Securities may be the BSP, a bank or a non-bank financial institution that is a member of the applicable payment system (such as BSP PhilPaSS or the PDDTS). c. Tap Method (Definition 26 in the proposed Order) . The TAP Method is currently open to all GSEDs. The proposed Order changes this coverage to Market Makers, BTr-Managed Funds and other entities as may be allowed by the Secretary of Finance, through the BTr. d. Participants in the Auction of Government Securities (Section 20 of the proposed Order, Section 36 of the current Order) . Financial institutions and GSEDs that meet the requirements may be accredited to participate in the auction of GS. An additional qualification of technological capability by way of interface to the auction and settlement systems was introduced. Accredited GSEDs will be allowed to participate in competitive and non-competitive auctions. The provision likewise recognizes that persons other than accredited GSEDs may participate on a non-competitive basis in accordance with BTr requirements thereon, to pave the way for retail participation in the primary auction when the time comes. e. Auction Systems (Definition 2 of the proposed Order, no provision in the current Order) . The proposed definition will allow BTr to accredit other auction systems. f. Other provisions : CSHEAI i. Where the auction falls on a holiday (Section 21, paragraph 2 of the proposed Order) . The proposal provides that the auction date shall be automatically adjusted to the next business day or as may be announced by the BTr. ii. Submission of Bids or Tenders (Section 22 of the proposed Order) . The proposal removed manual entry as a mode of transmission of non-GSEDs to eliminate the distinction between GSEDs and non-GSEDs and their manner of transmitting bids or tenders through the Auction System. iii. Payment of Awards where settlement date falls on a holiday. The proposal provides that settlement of awards shall take place on the next business day. iv. Investment of Allowable Funds by GOCCs and LGUs (Section 29 of the proposed Order) . The proposal deletes the reference to medium term, long term and special short term GS and fixed term deposits, but maintained the requirement that only investible funds or idle funds in excess of normal operating requirements may be invested in GS by GOCCs and LGUs. Furthermore, the proposal drops the requirement that GOCCs and LGUs are required to convert their holdings. Limitations on investment outlets of GOCCs. LGUs and TEIs have likewise been deleted. (3) Secondary Market Provisions: Power of the Secretary of Finance to Prescribe Standards on Secondary Markets (Section 5 of the proposed Order, no provision in the current Order) . The proposed Order emphasizes the power of the Secretary of Finance to prescribe the standards for secondary markets for GS, which power emanates from Republic Act No. 245. GS Trading Markets must be aligned in their service to the issue, providing services at par with one another, so that all investors in government securities enjoy the same rights and benefits regardless of their chosen market. The issuer should be able to exercise a prerogative of setting down minimum standards for its secondary market, and impose a requirement that all market providers should be capable of providing this minimum. In exercising this power, the following provisions are also introduced into the proposed Order: a. Governing Regulations for Secondary Market Transfers (Section 39 of the proposed Order, no provision in the current Order). The proposed Order provides that secondary market transfers of GS shall be governed by the proposed Order, applicable rules and regulations of the Secretary of Finance through the BTr, rules and regulations of the SEC, and rules and conventions of a BTr-accredited GS Trading Market. b. Accreditation of Secondary Market Participants (Section 40 of the proposed Order, no provision in the current Order) . The proposed Order sets forth the responsibility of the BTr to accredit and classify market participants on the basis of their commitments to the issue. These classifications are given as Market Makers, Dealers and Brokers, but may be amplified by the Secretary of Finance through the BTr if so warranted. The BTr is also given the responsibility to ensure that appropriate mechanisms are in place to monitor and enforce the accreditations of the entities accredited. cDIHES c. Special Covenants of Accredited Secondary Market Participants (Section 41 of the proposed Order, no provision in the current Order) . The proposed Order deems applicable confidentiality provisions to be waived where an accreditation is granted by the BTr to ensure that information sharing can take place between the GS Trading Market and the issuer to enforce the commitments of accredited entities. d. Market Structure of the Secondary Market (Section 43 of the proposed Order, no provision in the current Order) . The proposed Order requires a BTr-accredited GS Trading Market to be duly recognized by the SEC under applicable law, rules and regulations. e. Requirements for GS Trading Markets (Sections 44-46 of the proposed Order, no provisions in the current Order) . The proposed Order requires BTr-accredited GS Trading Markets to have rules and conventions to give effect to its commitments as a GS Trading Market, and provides for the minimum requirements in the following aspects: i. Trading Facilities (1) Transaction Modes, (2) Retail Market Structure; (3) Accessibility; (4) Regulatory Environment ii. Participants (1) Brokers, (2) Dealers, (3) Qualified Investors iii. Monitoring Facilities iv. Price Transparency v. Liquidity Facilities for Failed Trades Management and to Support Trading Activities Cash and Securities Liquidity Programs with SRO, Risk Mitigation Mechanisms, Collateral Administration and Management, and Regulatory Approval vi. Trading Programs that Promote Equality of Access vii. Settlement Standards (1) STP, (2) DvP, and (3) clearing authority viii. Other Capabilities (1) Business Continuity Plan, (2) Ability and Undertaking to Link with Existing Markets and Payment Systems, and (3) Electronic Interface with RoSS SHECcD