Updated and Consolidated Trading Rules

December 23, 1997 PSE CIRCULAR NO. 248-97 UPDATED AND CONSOLIDATED TRADING RULES Attached is the updated trading rules as approved by the Board of Governors and as a result of the consolidation of all recently issued trading rules as of this date. For historical purposes, this consolidated rules is annotated to refer to the original exchange circulars. cdlex While trading is now fully scripless, the rules on clearing and settlement are still included unchanged to cover the interim period where the old clearing houses still operate. An updated version reflecting an environment that is purely scripless will be issued soon. For your reference. (SGD.) RAFAEL L. LLAVE Chief Operating Officer TRADING AND SETTLEMENT RULES Table of Contents Chapter I. Trading Article 1. Trading Hours Article 2. Business Hours Article 3. Trading Booth Article 4. Entering and Prioritizing Article 5. Revisions in Order Article 6. Types of Orders Acceptable to the System Article 7. Opening Price Calculation Article 8. Cross Transactions Article 9. Special Block Sales Article 10. Board Lots and Price Fluctuations Article 11. Odd Lots Article 12. Limit of Orders Article 13. Matching of Orders Article 14. Cancellations of Posted and Done Orders Article 15. Cancellation of Matched Orders Article 16. Responsibility of Members on all Orders Article 17. Identification of Orders As Principal or Client Article 18. Identification of Orders in Terms of Foreign Ownership Article 19. Trading Band and Price Freezing Article 20. Trading Halt in Relation to Price Movement Article 21. Trading Halt in Relation to Disclosure Requirement Article 22. Correspondent broker trading On One Floor Only Article 23. Suspension of Trading Activity Article 24. Trading Equipment Failure during Trading Hours Article 25. Time Stamping Article 26. Conduct in the Trading Floor Article 27. IDs/Passes in Trading Floor Article 28. Dress Code II. Rules and Regulations on Clearing and Settlement Article 1. Choice of Clearing House Article 2. Payment to Clearing House Article 3. Deliveries to the Clearing House Article 4. Direct/Delayed Deliveries Article 5. Deliveries to the Central Depository Article 6. Incomplete/Delayed Deliveries/Non-Deliveries Article 7. Defective Deliveries Article 8. Defective Lodgments to the Central Depository Article 9. Acceptable Deliveries Article 10. "B" Shares Deliveries for "A" Shares Article 11. Reckoning of Ex-Dates Article 12. Effect of Suspension Article 13. Number of Offenses III. Rules and Regulations on Fees and Commissions Article 1. Exchange Fees Article 2. Commission Rates Article 3. Transfer Fees Payment Article 4. PCDI Fees Article 5. Payment of Tax and Manner of Filing Returns I. Trading Article 1. Trading Hours . Except for Saturdays, Sundays, legal holidays and days when the Bangko Sentral ng Pilipinas ("BSP") Clearing Office are closed, trading hours in the Philippine Stock Exchange shall be in one continuous session with the following daily schedule: Playing of the National Anthem 8:45 a.m. Pre-open Period 9:00 a.m.-9:30 a.m. Calculation of Open Price/Market Open 9:30 a.m. Regular Trading Period 9:30 a.m.-12:00 noon Closing Time 12:00 noon A ten (10) minute extension from closing time shall be allowed to execute orders at closing prices. If a computer problem occurs resulting in a cut-off of the communication link between the two trading floors (Ayala and Tektite), trading may be allowed beyond the authorized trading hours upon prior approval of the Securities and Exchange Commission subject to the following guidelines: 1. When both computers in the two trading floors are up but a link cannot be established by 10:00 a.m., independent trading may be allowed. 2. When by reason of the above trading starts at 10:00 a.m., trading time may be extended up to 1:00 p.m. 3. When by reason of the above trading starts at 11:00 a.m., trading time may be extended up to 1:30 p.m. 4. When the system cannot be set up by 11:00 a.m., trading is automatically cancelled for that particular day. Article 2. Business Hours . The trading floor premises shall be open from 8 : 00 a . m . to 2 : 00 p . m . No person shall be allowed in the premises outside this time except upon prior authority by the Exchange and accompanied by the guard and a representative from the Information and Technology (IT) Department. Article 3. Trading Booth . An operating member shall be entitled to one booth in either trading floor (PSE Plaza Ayala or PSE Center Tektite). The booth shall be maintained and manned during trading hours from 9:30 a.m. to 12:10 p.m. by at least one but not more than ten (10) authorized trading floor personnel composed of either of the following: (1) the Member or nominee, (2) Authorized Traders, or (3) Telephone Clerks. The personnel assigned in the booth must be capable of and actually be doing trades. The staff assigned to operate the computer terminal(s) must be certified by the Exchange as a MakTrade user. In case buying and selling orders are received on the trading floor directly from the clients themselves, the staff receiving the orders must be licensed by the SEC. aisadc Failure to appropriately man the booth shall subject the broker to a fine of P1,000 per day of violation. If client's orders the broker's offices, the receiving staff need not be SEC-licensed to be able to trade at least one of the authorized trading floor personnel must be a Maktrade certified user. If brokers will have to assign only one staff who will be trade order entry and receiving orders directly from the clients themselves, then trade staff must be both a certified Maktrade user and SEC-licensed. 1 Article 4. Entering and Prioritizing . Except for cross transactions, orders shall be entered into the System by the brokers in the order in which they were received and shall be prioritized by the trading system first by price and then by time. Article 5. Revisions in Order . Reduction in the volume of a posted order shall not lose its priority in the queue. However, an increase in the number of shares of a posted order shall lose its priority and shall be queued at the last position for the stated price. Article 6. Types of Orders Acceptable to the System . The following types of orders may be accepted by the system: (a) Pre-open Pre-open order . The pre-open limit on a buying order is the highest price one is willing to pay and the limit on a selling order is the lowest price one is willing to accept. The price at which this order will be transacted shall be its stated price or a better buying (lower) or selling (higher) price depending on the calculated opening price. A pre-open limit order not matched during the pre open period shall automatically be forwarded to the daily market trading. (b) Daily Market 1) Limit Order The limit on a buying order is the highest price one is willing to pay and the limit on a selling order is the lowest price one is willing to accept. If not matched for the day, it is voided on the next trading day. Brokers may enter the order as a Good Till Cancelled (GTC) order which is valid for seven calendar days 2) Cross Transaction : A n order where the same broker has a buying and selling order from his clients at the same price. (c) Post Close 1) At the close order : The price on this order shall be limited to the closing price of a particular issue and is acceptable only during the 10-minute run-off period. 2) Cross transaction : An order where the same broker has a buying and selling order from his clients at the same closing price. Article 7. Opening Price Calculation . The opening price of each security shall be computed by the System based on the pre-opening price and its last closing price. The computation shall include a determination of all prices which have possible matching and volumes that could be matched at each of the prices. The opening price is that price which offers the maximum number shares matched. PROVIDED , that if the prices have the same volume that could be matched, the price closer to the previous close is taken as opening price; PROVIDED FURTHER , that if the prices have the same volume that could be matched and are equidistant from the previous close the highest price is taken as the opening price. Article 8. Cross Transactions . Crosses shall be made in accordance with the following requirements: (1) When the best bid and best sell prices are at most two (2) fluctuations apart, provided the price is within the Best Bid and Offer (BBO); (2) Where there is no Bid or Asked postings, a broker who wishes to make a cross transaction should post on both the buying and selling sides before executing a cross; (3) When done within the ten (10) minute extension as provided for in Section 1, the cross shall be at the closing price; (4) There shall be an automatic cross when a broker has a posted order either a buying or a selling and then posts another order at the same price at the other side. In such a case the subject broker shall have the priority among the brokers who posted earlier in the queue. His newly posted order shall be matched with his earlier posted contra order regardless of his position in the queue. Article 9. Special Block Sales . All special block sales should first be approved by the Floor Trading Arbitration Committee . The transaction value of the subject of the block sale shall not be less than Five Million Pesos (P5 . 0 MM) . A transaction is defined as one (1) entry to the system. However, a block sale involving one listed issue to be done at two (2) different prices shall be counted as two (2) transactions. Each of the transactions shall be more than the minimum amount to qualify as a block sale. The following procedures shall be observed when requesting for a Special Block Sale: (1) The price shall be approved by the Committee in accordance with established rules and regulations. For the purpose of this rule, the allowable price range for a special block sale should be between the high and the low of the day. (2) In case the amount is not within the high and the low of the day, a letter-request citing the reasons for a special block sale should be filed with the Floor Trading Arbitration Committee which shall decide on the request. (3) All letter-requests shall be first submitted to PSE Management for signature verification. Once the signature/s are verified to be that of the authorized and/or delegated officials, the broker requesting for special block sale shall secure the final approval of any two (2) Floor Trading Arbitration Committee members personally present on the floor on the transaction date. A copy of this accomplished form shall be submitted to the Information Technology (IT) Help Desk Counters (Ayala and Tektite) for appropriate Market Regulator Terminal (MR TERM) approval. A prescribed request form together with the Specimen Signature Form is set out in Form 3 under Annex "1" and Annex "2" respectively. 2 (4) In all cases, block sales must be effected and entered into the system during trading hours. Article 10. Board Lots and Price Fluctuations . Trading of shares shall be in terms of fixed minimum amounts called board lots depending on the stock price range. Also depending on the stock price range, prices may change only in fixed steps called price ticks or price fluctuations. For purposes of easy trading, the Exchange shall fix the board lot for each listed issue and set the table of board lots and make the necessary amendments if warranted by the circumstances. cd Board lots shall be automatically updated every end of the day based on the closing price of that particular issue and in relation to the existing schedule of board lots to be made effective the following trading day. Whenever board lots are updated, it shall be the responsibility of the brokers to update their affected good-till-canceled (GTC) orders. 3 Until amended, the following table of board lots and price fluctuations shall be followed: FOR ALL LISTED ISSUES PRICE RANGES PRICE SHARES PER FROM TO FLUCTUATIONS BOARD LOT 0.001 0.0024 0.0002 1,000,000 0.0026 0.005 0.0002 1,000,000 0.0055 0.01 0.005 1,000,000 0.011 0.025 0.001 100,000 0.026 0.05 0.001 100,000 0.0525 0.10 0.0025 100,000 0.105 0.25 0.005 10,000 0.26 0.50 0.01 10,000 0.51 1.00 0.01 10,000 1.02 2.50 0.02 1,000 2.55 5.00 0.05 1,000 5.10 10.00 0.10 1,000 10.25 25.00 0.25 100 25.50 50.00 0.50 100 50.50 100.00 0.50 100 101.00 250.00 1.00 10 252.50 500.00 2.50 10 505.00 UPWARDS 5.00 10 Article 11. Odd Lots . An odd lot is any quantity less than the board lot. Odd lots or numbers of shares less than a board lot are due to fractional issuance of stock dividends or special sales arrangements or when what was once a board lot becomes and odd lot because of price swings. Members may trade in odd lots. The use of the odd lot board is supposed to be for trading in odd lot shares only. Any broker caught violating the spirit of this rule by using the odd lot board to complete one large main board order will be penalized as follows: 1st offense P5,000.00 2nd offense 10,000.00 3rd offense 15,000.00 4th and subsequent offenses 25,000.00 4 Orders in the odd lot board shall be matched only if their volume or number of shares are exactly the same. The price of the hitting broker may be the same or better but the trade will be matched at the price of the one who first entered the order. In the case of two or more postings at the same volume and the same price, the order posted first shall have priority in being matched with the opposite order at the same volume and same or better price. In the case of two or more postings at the same volume but different prices, versus another broker posting at the other side of the trade at the same volume and at a price lower than one of the opposite postings, the trade match shall be between the broker posting last with the brokers on the other side offering the best price at the price of the already posted broker. Good till canceled (GTC) odd lot orders shall stay in the trading system for an indefinite validity until actually canceled. 5 Article 12. Limit of Orders . Orders to be posted shall be limited to a maximum of three fluctuations from the last traded price and a capitalization of Thirty Million Pesos (P30,000,000 . 00) per order. However, brokers may impose their own limits per order for their traders by formally writing the Exchange, Attn: IT Department. The effectivity of such limit shall be when the Exchange has updated the database files. Article 13. Matching of Orders . Except for Special Block and Odd Lot Sales, the System shall not execute any order at a price lower than the Best-Bid-Offer (BBO). Article 14. Cancellations of Posted and Done Orders . (a) Cancellation of Posted Pre-open Orders. The following transactions cannot be canceled between 9 : 00 a . m . to 9 : 14 a . m .: 1. Posted buying/selling orders that get matched in price (during the pre-open period, matching means only in price and therefore not a done transaction yet) by other brokers; 2. Posting is within the band (between the highest posted buying price and the lowest posted selling price provided the selling price is lower than the buying price). From 9 : 15 a . m . to 9 : 30 a . m ., all posted orders regardless of the price and volume cannot be canceled. Cancellations in all these periods may however be done if within five (5) minutes therefrom, a posting involving the same issue and the same client at a better price and at a volume not less than the original canceled order is made. In this regard, a better price means a lower price for a selling order or a higher price for a buying order. Violations of the above restrictions on cancellation shall be penalized as follows: First Offense P1,000.00 Second Offense P2,000.00 Third Offense P3,000.00 Fourth and Subsequent Offense P4,000.00 6 Article 15. Cancellation of Matched Orders There shall be no cancellation of done or matched trades except in computer errors or evident mistakes. PROVIDED THAT , in the case of a cross transaction, a formal letter-request, as set out in Form 4 under Annex "3" , shall be signed by the firm's authorized signatories addressed to the Floor Trading Arbitration Committee, indicating the reason(s) for the request for cancellation and a confirmation that the two (2) parties involved in the transactions have agreed to the cancellation. PROVIDED FURTHER THAT , in the case of a transaction involving two (2) brokers, the letter request shall be co-signed by the two (2) brokerage's authorized signatories indicating that their respective clients and/or themselves have both agreed to the cancellation. PROVIDED FINALLY , that the intended cancellation in both cases shall not violate any PSE or SEC rules and regulations. 7 The following is the procedure in requesting for cancellation: cdt 1. A request for cancellation shall be submitted for the approval of the Floor Trading Arbitration Committee which shall determine if the cause for the request exists and to impose a penalty if warranted by the circumstances. Requests for cancellations require signatures of three (3) Committee members . 2. After securing the needed signatures, the letter-request should then be sent to the Exchange Management through the Market Regulator Terminal (MRTerm) staff on each of the Trading Floors for verification of the signature of the Floor Trading Arbitration Committee members and the authorized signatories of the requesting brokers. For this purpose, specimen signatures must be submitted. Cancellation requests with defects in the signatures submitted shall not be acted upon. 3. To ensure that the Daily Question shall no longer include the trades to be canceled which otherwise would have distorted it, requests for cancellation shall reach the Exchange Management (the Chief Operating Officer [COO] or in his absence, the Department Head of the Information Technology [IT] Department) not later than 2:00 p.m. of the same day. 4. In cases of emergency where the letter-requests with the necessary signatures cannot be presented but trades need immediate cancellation, the concerned brokers may call the COO or the Head of the IT Dept. to have the trade canceled. The brokers shall however make representation that they have already gotten the verbal conformity of at least three (3) members of the Floor Trading Arbitration Committee. The appropriate letter request should be submitted to the Management within twenty-four (24) hours from the time Management acted upon the request. 5. Requests for cancellation after 2:00 p.m. of the same day shall be incorporated the following day. Article 16. Responsibility of Members on all Orders . A member shall be responsible for any order entered into the System through his/its terminals, including any liability that may arise out of the entry. Article 17. Identification of Orders As Principal or Client Each order made by the dealer and/or principal must be identified by entering the letter "P" on the "P/C Flag" after inputting such order. Brokers through Order Entry Window must set up the default flag to either P (Principal) or C (Client). Consequently, orders that are not specifically identified will follow the default flag. In case there is a need to change the P/C Flag of a done deal, the broker concerned shall submit a written request addressed to the Chief Operating Officer (COO) , indicating the reason for the change(s) not later than the settlement date. After this date, no changes shall be allowed. The request to change the P/C flag a prescribed standard form is set out in Form 2 under Annex "4" . If approved, the Information and Technology Department (ITD) shall print a corrected Daily Transaction Report (DTR) indicating clearly in the title that it is an amended DTR. This amended DTR shall replace the old DTR printout and shall be kept for reference and file by the broker. A fee of P100.00 shall be levied for every amended DTR. aisadc The DTR's for the week may be included as an attachment to the broker's regular remittance of transaction taxes to the BIR. 8 Article 18. Identification of Orders in Terms of Foreign Ownership All orders entered into the MakTrade and in their own broker system (for those equipped with the Communication Front End [CFE]) must be identified whether the order is for a Foreign or Local client. Orders for the principal account (P flag) should also be identified as Foreign or Local depending on the nationality of the brokerage house. Similar to the P/C flag, the F/L flag may also be default value by the broker to facilitate order entry. This monitoring system intends only to advise brokers, on a real-time basis the extent of foreign ownership level of each listed issue. MakTrade cannot stop a trade if it is about to breach the foreign ownership limit and brokers shall thus decide for themselves whether to push through with their foreign clients' buy order or not. Prior to entering a foreign buy order, brokers are advised to refer to the Stock Information (F4) and look at the "Shares Avail to Foreigners". To maintain the integrity of the system, brokers shall advice the Exchange (c/o Clearing & Settlement Dept.) any error or change in their F/L flag by 9 using the same form as in the change of P/C flag. Article 19. Trading Band and Price Freezing . Except for special block sales, a price band shall be set at not more than Fifty Per Cent (50%) up and not more than Forty Per Cent (40%) down on a particular day, reckoned from the last closing price or at last posted bid price, whichever is higher. In cases of issues that were not traded for the last six months, the last special block sale or a negotiate sale price, shall be considered the last traded/closing price. Whenever the price of a security falls outside the trading band, it shall not be accepted by the trading system. 10 Article 20. Trading Halt in Relation to Price Movements . Whenever an issue reaches its ceiling or floor price limits during a particular trading day, a trading halt shall be imposed by the Exchange on the following day unless the issuer discloses the reasons why its prices moved towards the limits. Whenever an issue hits the price limits, the Compliance & Surveillance Dept. shall formally ask the company concerned for an explanation of the unusual price movement and the reply shall be distributed on the floor for the information of all member-brokers. The Exchange may cause the publication of the company disclosure and only when such disclosures are disseminated that trading will be allowed to resume subject again to the trading band rule. 11 The preceding paragraph notwithstanding, trading may be permitted at a price above or below the limits set forth above if the Exchange shall have determined that its strict adherence will result in undue obstruction in the attainment of a liquid market for a particular issue or class of securities in the following cases: (1) A broker waiting to post a price outside the trading band and after a period of at least one whole day that no transaction was made, the interested trader may write the Exchange through the Floor Trading Arbitration Committee to be allowed to trade outside the trading band provided that the trade shall include at least ten (10) board lots or P100,000, whichever is higher. 12 (2) Where the common stock of an issuer corporation has been classified into Class "A" and Class "B" shares and either class of shares has not been traded for more than fifteen (15) calendar days immediately preceding the transaction. Article 21. Trading Halt in Relation to Disclosure Requirement (a) Voluntary Trading Halt Subject to the approval of the Exchange, a listed security may go on voluntary trading halt if a material information is to be disclosed to the Exchange which would affect the trading of the said security. The listed company shall notify the Exchange in writing of its intent to voluntarily halt the trading of its security; (b) Involuntary Trading Halt (1) when disclosure of material information or announcement thereof is made prior to or during trading hours, a trading halt may be issued until a written confirmation of the disclosure or announcement is made, verified, and properly disseminated to the public; (2) In case of press releases, a trading halt may be issued if: (a) the press release submitted to the Exchange was not approved by the Securities and Exchange Commission (SEC) and contains in the opinion of the Exchange, material information; (b) the press release was made without prior submission of a copy thereof to the Exchange and contains, in the opinion of the Exchange, material information. It is understood that a press release with the Securities and Exchange Commission (SEC) approval submitted to the Exchange is considered proper disclosure. aisadc In the foregoing instances, the Exchange shall first determine the circumstances involved, (i.e. unusual trading activity, drastic price movement, etc.) prior to issuing a trading halt. A trading halt shall be in effect until after one (1) hour from distribution of the disclosure by the Exchange to the public or the next trade day if the disclosure is circulated after trading hours. Without the disclosure, the trading halt shall continue to be in effect unless otherwise lifted by the Exchange. In the case of a press release, the Trading Halt shall be in effect until after one (1) hour from distribution of the SEC approved press release by the Exchange to the public, on the next day if the SEC approved press release is release by the Exchange after trading hours. 13 Article 22. Correspondent broker trading and Trading On One Floor Only . If for any reason one trading floor cannot operate, the Chairman or the President can authorize trading to start on the other trading floor at 10:00 a.m. Whenever the start of the trading hours is delayed, the pre-open period shall be shortened to ten minutes. Subject to SEC approval on the extension, market will close at 12:30 p.m. followed by a ten-minute run-off period to execute orders at closing prices. Under a one trading floor scenario, affected brokers may trade on the other trading floor through their correspondent brokers. Trades done this way shall be on a no commission basis. Affected brokers may send their trade(s) to go to the booths of their correspondent brokers to assist. The correspondent brokers shall allow at least one of these trades in their trading booths. 14 Article 23. Suspension of Trading Activity . When, for any reason whatsoever, the communication link connecting the Tektite trading floor to the Central Matching Computer is cut, the following policies shall be observed to ensure that there is equality on the trading floors as far as the ability of the brokers to conduct trading activities: 1) The IT Department is authorized to immediately put the trading to a halt. This will mean that there will be no trading on both floors. The IT Department shall do everything possible to restore the link. As soon as the link is restored, trading is to resume automatically. 2) Depending on the length of time that trading was suspended, the Exchange may decide to extend the trading within the period provided for in Section 1 of Article 1. The decision shall be announced on the two (2) floors at the earliest possible time. Article 24. Trading Equipment Failure during Trading Hours . Members shall report immediately to the Exchange any event of failure, error or defect in any of the trading equipment (computer terminals, host computers, etc.) installed by the Exchange in the trading floor or member's booth. In any such case, the Exchange shall have the discretion to assign or allocate, or if necessary, to reallocate booths and equipment, where possible, to the affected Member/s. The Exchange shall not be responsible for any damage arising from such failure, error or defect in the equipment. Article 25. Time Stamping and Order Ticket Rule Every order received by a broker or dealer or any other associated person or salesman of a broker or dealer to buy or sell securities for customer shall be entered on an order form. Each buying and selling order form shall be time stamped by the broker or dealer or any other associated person or salesman of a broker/dealer or any person acting on his behalf upon receipt of the customer's order and upon transmission to the trading floor, if necessary. Time recording of subsequent action on an order whether for amendment, cancellation or actual matching thereof shall be captured by the computerized trading system of the Exchange. Any such information shall be printed and made available for legal and/or audit purposes. 15 Article 26. Conduct in the Trading Floor . The following acts considered detrimental to the interest of the Exchange are strictly prohibited in the trading floor: (a) A. Bringing in food/drinks, horse-playing and improper attire constitute minor offenses subject to the following penalties: First offense reprimand Second offense Fine of P2,000.00 Third offense Fine of P4,000.00 and suspension; (b) The following acts constitute major offenses : bringing in intoxicating liquor, being under the influence of liquor, bringing in firecrackers, inflammable materials and other pyrotechnics, bringing in guns and other deadly weapons, destroying, vandalizing Exchange properties, disrespect to the flag, governors and Exchange officers and members of the Floor Trading and Arbitration Committee, fighting, sexual harassment, stealing and repetitive minor offenses. Any personnel caught violating any of the above-mentioned acts shall be subject to the following penalties: (1) First offense Fine of P5,000 . 00 and suspension as determined by the Floor Trading Arbitration Committee; (2) Second offense expulsion 16 (c) Any member-broker, dealing partner or authorized clerk has the duty to exercise due care in operating and using all equipment at the Member's booth inside the trading floor. Any damage caused to any of the equipment or fixtures or any other property shall be the sole responsibility of the Member-broker who shall reimburse the Exchange for the cost of repairing or replacing the same. The Exchange may impose whatever disciplinary action it think fits, if proven that the member-broker concerned or any of his staff or authorized clerks, or any person employed by him, caused the damage intentionally. Article 27. IDs/Passes in Trading Floor . All personnel in the trading floor must wear valid PSE IDs/Passes. A valid ID/Pass is one which has been issued specifically to a trading floor personnel while assigned with the brokerage firm printed on the card/pass, and which has been validated by the Exchange for the year indicated at the back. A member who hires a new trading floor personnel must apply to the Exchange for the immediate issuance of a new PSE ID/Pass to the employee prior to his assignment to the trading floor. Any member who hires a new trading floor personnel but fails to comply with Sec. 2 hereof shall be fined a minimum penalty of five thousand pesos (P5,000.00). Any person not connected with any member but gains entry to the trading floor by using the PSE ID/Pass issued to him under the name of his previous employer shall be banned permanently from the Exchange. Any employee, upon resignation from a member shall surrender his old ID/Pass to his former employer. Said employer shall, in turn, return the old ID/Pass to the Exchange. 17 All requests for guest's/visitor's/trainee's entry to the trading floor shall be signed by a member/nominee and submitted to the Membership Department for guests in Tektite and to the PSE Head of Ayala Operations for guests in Ayala at least one (1) day prior to the actual date of visit. 18 Article 28. Dress Code . Only acceptable business attire such as: suits, blazer, barong (long or short sleeves), plain long-sleeved (of any color) and short-sleeved (white only) shirt with tie shall be allowed in the trading floor. The following attire shall not be allowed: sandals, shorts, sneakers, jeans, denims, stirrups, stretch pants, sockless shoes for men, athletic jacket and T-shirts. Male personnel with long hair and earrings shall not be allowed entry. Only conventional haircut shall be allowed. Ponytails, shoulder length hair and outlandish dyed colored hair among males shall be disallowed. 19 II. Rules and Regulations on Clearing and Settlement Article 1. Choice of Clearing House . Clearable transactions shall be strictly limited to purchases and sales of stocks listed in the Exchange by and between member-brokers. Brokers may choose their preferred clearing house for issues that are still under the scrip based clearing. At the end of each trading day, the brokers shall print their DTR's and ABC's. The Information Technology (IT) Department of the Exchange shall segregate the day's trading file by clearing house. Issues that are already under the book-entry system shall no longer be included in the ABC and DTR that will be submitted to the clearing houses. Scripless issues shall be settled through the Central Depository. Unless advised to the contrary, the Exchange shall continue with the present clearing house preferences. Brokers wishing to transfer to the other clearing house shall formally advise the Exchange which shall in turn advise the Information Technology Department (ITD) and the two (2) Clearing Houses. The letter should be received by the Exchange at least three (3) full days before the effectivity of the request to allow all concerned to be advised accordingly. cdt Article 2. Payment to Clearing House . All regular transactions in listed securities, inclusive of issues under the scrip-based and book-entry system, must be paid or settled with the Clearing House not later than 1 : 00 p . m . on the fourth (4th) trading day after the transaction date (T + 4) . Payments not received or remitted to the Clearing House by 1 : 00 p . m . of the settlement date shall be penalized as follows: First Offense 1) Fine of P5,000.00; 2) Penalty of 1/4% of the amount due for every day that the amount remains unpaid; 3) Suspension if the amount is not paid by 9:00 20 a.m. of the day after settlement date which suspension shall last until payment is made. Second Offense 1) Fine of P10,000.00; 2) Penalty of 1/2% of the amount due for every day that the amount remains unpaid; 3) Suspension if the amount is not paid by 9:00 21 a.m. of the day after settlement date which suspension shall last until payment is made. Third & Subsequent Offense 1) Fine of P20,000.00; 2) Penalty of 1% of the amount due for every day that the amount remains unpaid; 3) Indefinite suspension which shall last until the committee appointed to check the broker's books has finished its examination. Article 3. Deliveries to the Clearing House . Certificates of stocks and/or stock assignments of issues that are not yet under the book-entry system of the central depository shall be submitted to the Clearing House not later than 1 : 00 p . m . of the fourth (4th) trading day after the transaction date. (T + 4) In support of their SELL transactions , brokers shall submit their Form E's for clearing accompanied either by stock certificate/s or by stock assignment/s. In support of their BUY transactions , brokers shall submit their Form D's for clearing. Brokers shall see to it that the stock certificates delivered by them are endorsed in blank, indicating therein that all endorsements are guaranteed by them. Article 4. Direct/Delayed Deliveries . There shall be no direct and delayed deliveries. Direct deliveries refer to transactions done on the trading floor but are not coursed through the Clearing House. Delayed deliveries refer to transactions done on the trading floor and are coursed through the Clearing House but are made on a date later than the usual settlement date. In the event that timely delivery cannot be made, the broker shall write the Floor Trading and Arbitration Committee for assistance, but no penalty shall be imposed if delivery is eventually made on the due date. The broker shall fill up a PSE letter of Assistance for the purpose. A prescribed letter form is set out in Form 4 under Annex "5" . Without prejudice to the penalties provided hereinbelow, in the event of failure of the broker to make delivery on the due date, the Floor Trading Arbitration Committee may buy the shares for the account of the erring broker. In such event, the Floor Trading Arbitration shall inform the Exchange Management through its Trading and Settlement Department (TSD) who shall likewise inform the Clearing House about the delay in the delivery of the certificate/s of shares. Article 5. Deliveries to the Central Depository For PCD-eligible shares, a book-entry system (BES) occurs on settlement date instead of physical delivery of shares. PCD is able to effect transfer of shares only when brokers have either the shares already in their position or the brokers must have lodged and delivered to PCD the new shares for credit to their position. Brokers must ensure that they have the necessary shares for book entry settlement not later than 1:00 p.m. of the settlement day. In case brokers have already lodged the certificate to the PCDI computer but still ( illegible portion in PSE files ) certificate of PCDI, brokers are advised to effect the ( illegible portion in PSE files ) than 1:00 p.m. of settlement date. The PCDI computer will not accept other deliveries after this time and will proceed to the settlement process. Any non-availability of shares during the automated settlement will be treated as a non-delivery and a possible failed trade. 22 Article 6. Incomplete/Delayed Deliveries/Non-Deliveries . Delayed deliveries shall be penalized as follows: First Offense Fine of P2,500.00 or 1/10 of 1% per day of the prevailing market value of the undelivered shares, whichever is higher; Second Offense Fine of P5,000.00 or 1/10 of 1% per day of the prevailing market value of the undelivered shares, whichever is higher; Third and Subsequent Offense Fine of P10,000.00 or 1/10 of 1% per day of the prevailing market value of the undelivered shares, whichever is higher The broker has two (2) days grace period from the settlement date within which to make delivery without the penalty of suspension. If no delivery is made, the Floor Trading and Arbitration Committee shall meet to determine if the penalty of suspension is warranted. The erring broker shall be given the opportunity to explain in the meeting and shall show cause why the penalty of suspension should not be imposed. Suspension, if any, will be imposed only after such meeting. Suspension shall be in effect until deliveries are made. Article 7. Defective Deliveries Defective deliveries refer to errors/defects in the documents covering transactions in listed securities which shall include but are not limited to the following: a) stock assignments which refers to a wrong Form D date; b) stock assignment signed by the broker and not by the registered owner; c) incomplete deliveries (Form D's and/or Form E's are less or more than that required by the Form ABCs d) delivery of wrong class of shares (i.e. Class "A" instead of Class "B") e) delivery of previously cleared stock assignment (double cancellation); f) delivery of shares which have been converted to new par value shares; g) incomplete information in the tax details section of the stock assignment; h) Forms ABC, D & E not signed by the broker's authorized signatories, i) missing or incomplete attachments to forms (i.e. direct transfer letter, subscription agreement, Official Receipt, Pull-out-slip, Out Receipt) j) delivery of wrong security; k) delivery of stock assignment notwithstanding possession by broker of the required stock certificate; l) any other defect/s requiring amendment or alteration of the Forms ABC, D & E or would involve the submission of other or replacement documents. Defective deliveries not amended within the same day of notification, shall be penalized as follows: First Offense Fine of P3,000.00 plus suspension until correction is effected Second Offense Fine of P5,000.00 plus suspension until correction is effected Third and subsequent Offense Fine of P10,000.00 plus suspension until correction is effected While defective deliveries amended within the day of notification are not subject to monetary penalties, member-firms will however be allowed only up to ten (10) incidence of defective deliveries. Thereafter, the member will be fined P2,000.00 per instance of defective delivery reported by the Clearing House. After twenty (20) instances, the fine will be increased to P5,000 . 00 . Counting will be reset each end of the year. 23 In cases of defective deliveries discovered by the Transfer Agents, brokers who make amendments ( i . e . change in par value, changes in the classification of shares from "A" to "B" or vice versa, change in ownership from "street" certificate to individual or vice-versa ) to the transfer office shall notify their respective clearing house of any correction submitted to subject transfer office within the period provided by the SEC. A copy of the corrected document/s duly acknowledge by said transfer office shall likewise be submitted to the Clearing House for recording purposes. 24 Article 8. Defective Lodgments to the Central Depository . Defective lodgments include certificates and stock assignments lodged by brokers to the PCDI during the lodgment period set by the central depository which were eventually passed to the transfer agents and subsequently found defective. The transfer agents then return these defective lodgments to the PCD for correction by the concerned brokers. In the meantime, the broker is supposed to uplift the corresponding shares found defective so that it will be subtracted from the broker's position with PCD. cdlex As soon as the broker is informed about the defective lodgment, the broker shall uplift the shares using their PCD terminals and check and coordinate with PCD for the correction of the defects noted. PCD will coordinate initially with the concerned brokers for the resolution of the defects. PCD will report to the PSE only those cases where the defects cannot be readily resolved in which case, brokers shall be informed by the Exchange and given three (3) days to uplift their defective shares or be meted with a penalty of: First Offense P3,000 per issue/day Second Offense P5,000 per issue/day Third and Subsequent Offenses P10,000 per issue/day Starting immediately on the 4th day from notice. 25 Article 9. Acceptable Deliveries . Acceptable deliveries shall be evidenced by a written and signed acknowledgment letter from the concerned clearing house. The Clearing Houses will accept stock assignments with reference to a Form D of the other Clearing House only if cleared by the other Clearing House and which comply with the following: a) cleared stock assignments shall be stamped "Cleared-Over-the Counter" by the other clearing house; b) a copy of a Request for "Over-the-Counter" clearing form (pull-out slip) shall be attached to the cleared stock assignment being delivered to the other clearing house by the requesting broker. If this request is presented by another party, a copy of the "Out Receipt" duly signed by the issuing broker shall be attached. 26 Article 10. "B" Shares as Deliveries for "A" Shares . Under the scrip-based or scripless settlement, brokers'/clients may deliver "B" shares instead of "A" shares of the same company. In such a case the records of the buying broker must be corrected to reflect the "B" shares received. All brokers must accept the "B" shares delivered. 27 Article 11. Reckoning of Ex-Dates . Under the scrip-based settlement system it would require the documents to reach the transfer agents on the 8th day from trading day. However, in the scripless scenario, the settlement reached the central depository on the 4 th day. To be able to jive the date of receipts and the ex-dates as determined by the Exchange, the ex-date of PCD-eligible shares shall be reckoned as four (4) trading days from record date. While the ex-date of non-PCD-eligible shares shall be reckoned as seven (7) days prior to record date. 28 Article 12. Effect of Suspension . In cases where a suspension is imposed under Chapter II of these rules, the suspended broker shall be prohibited from trading with or through any broker and from issuing confirmation receipts. The Exchange shall freeze the broker's holdings by not allowing any lodgements and uplifting of shares at the PCD and advise the clearing houses not to allow the over the counter (OTC) clearing of the broker's Form "D" and stock assignments. The suspended broker's holdings may be released only upon clearance by the Exchange. Article 13. Number of Offenses . The number of offenses a broker has made shall be reckoned from the start of the Exchange's (PSE) operations until the end of the year. Thereafter, the count shall start all over again. III. Rules and Regulations on Fees and Commissions Article 1. Exchange Fees The Exchange shall collect from each of the buying and selling broker an Exchange fee of 1/200 of 1% 29 of the total amount involved in every contract executed. Article 2. Commission Rates The brokerage rates of commission on listed and unlisted, i.e., over-the-counter, common and preferred shares, shall not be more than 1% of the total amount involved in the contract excluding taxes and other fees . Brokers' commission is subject to VAT equivalent to ten (10%) per cent of the total amount and that the said VAT can be shifted to the market and investors. Brokers shall pass on the 10% VAT on commission to their clients. Brokers' confirmation receipts shall therefore indicate the net amount of commission and then separately a 10% VAT. 30 Article 3. Transfer Fees Payment Member-firms shall have forty-eight (48) hours from receipt of a written notice from the Transfer Agent or the Clearing House to pay the required transfer fees. 31 Article 4. PCDI Fees . Issues lodged into the scripless system shall now be charged a PCDI fee based on the ad valorem rate of .0000834 without any maximum or minimum amount. This rate shall be applicable on both the buy and the sell side. PCDI fee is supposed to be in lieu of the transfer fee of P100 + VAT and the cancellation fee of P20 + VAT. Should a client buy a PCDI-eligible issue and still wants a stock certificate issued to his name, said client shall therefore pay the PCDI ad valorem charge, an upliftment/withdrawal fee of P25 per request and P100 + VAT per certificate transfer fee. Similarly, a client who wishes to sell a PCDI-eligible issue and has still with him the stock certificate for delivery to the broker, said client shall then be charged the PCDI ad valorem rate and a cancellation fee of P20 + VAT per certificate. For clients whose shares are all lodged into the PCDI system, only the PCDI ad valorem rate will be charged. For the relevant procedures, brokers are advised to refer to the PCDI manuals. PCDI charges shall be passed on to the client and shall be made mandatory. 32 Article 5. Payment of Tax and Manner of Filing Returns . A stockbroker who effected the sale has the duty to collect the tax from the seller upon issuance of the confirmation of sale, issue the corresponding official receipt therefrom and remit the same to the Revenue District Officer (RDO) where his principal place of business is located within five (5) banking days from the sale of collection thereof and to submit on Mondays of each week to the Trading and Settlement Department (TSD) of the Exchange, a true and complete return, which shall contain a declaration that he made it under the penalties of perjury, of all the transactions effected by him and turned over to the concerned RDO. The TSD shall reconcile the same with the weekly reports of stockholders and in turn transmit to the RDO on the first (1st) and sixteenth (16th) day of each month a consolidated return of all transactions effected during the preceding period. 33 ANNEX 1 PSE-TSD FORM 3A SPECIAL BLOCK SALE AUTHORIZED SIGNATORY/IES SPECIMEN SIGNATURE FORM MEMBER-BROKER FIRM BROKER'S CODE ADDRESS: BOOTH LOCATION: TEL. #S [ ] PSE AYALA TRIANGLE [ ] PSE TEKTITE CENTER AUTHORITY TO SIGN REQUESTS FOR SPECIAL BLOCK SALE IS GRANTED TO THE FOLLOWING OFFICIALS OF THE COMPANY: NAME OFFICIAL INITIAL SIGNATURE DESIGNATION ________________ __________ ______________________ __________ ____________ ________________ __________ ______________________ __________ ____________ ________________ __________ ______________________ __________ ____________ LETTER REQUEST SHALL BE SIGNED BY ANY [ ] ONE [ ] TWO OF THE ABOVE SIGNATORY/IES. ________________________________________ __________________ OFFICER GRANTING AUTHORITY: DATE (MEMBER OR NOMINEE ONLY) __________________________ ____________________ PRINTED NAME SIGNATURE INSTRUCTIONS: 1. This form shall be submitted in two (2) copies. 2. Should there be any amendment in this list, the Member-broker shall notify the Exchange and submit a revised form that will supersede the old. ANNEX 2 PSE-TSD FORM #3B TO: Philippine Stock Exchange, Inc. ATTN: Floor Trading Arbitration Committee DATE: __________________ REQUEST FORM FOR SPECIAL BLOCK SALE Check if a Cross Sale Last Trade Price_____ Date Last Traded _______ Today's Opening Price(if applicable)___________ Selling Broker's Particulars : Broker's Name: ________________ ID#. _____ Stock Name: ________________ Stock Code: _____ Quantity of Shares: ________________ Unit Price: ________________ Total Market Value: ________________ Buying Broker's Particulars : Broker's Name: ________________ ID #. _____ Stock Name: ________________ Stock Code: _____ Quantity of Shares: ________________ Unit Price: ________________ Total Market Value: ________________ Note : It is understood that both buyer and seller are aware and have agreed on the price . If however price is not within the allowable trading band relative to the last traded price; (Chapter 1, Article 9 of Trading Rules), please state the reason below : ____________________________________________________________________ ____________________________________________________________________ Buyer's Authorized Signatory: Seller's Authorized Signatory: [Please sign only this portion if a cross sale]. [Not necessary for cross sale] ________________________ _____________________ Name Name ________________________ _____________________ Position Position Signature Verified by : _______________________ ( Printed Name Signature ) Approved by : ( Floor Trading Arbitration Committee Members ) ______________________ Printed Name Signature ______________________ Printed Name Signature Notified: Time By: Ayala _______ _________ Tektite _______ _________ ANNEX 3 PSE-TSD Form 1 PHILIPPINE STOCK EXCHANGE, INC . Attn.: Floor Trading Arbitration Committee REQUEST FORM FOR CANCELLATION OF TRANSACTION Trade Date_____ Details of Trade to be Canceled: Contract No. Stock Symbol No. of shares Price ___________ ______________ _____________ _________ ___________ ______________ _____________ _________ ___________ ______________ _____________ _________ ___________ ______________ _____________ _________ Reason/s for cancellation:_______________________________________ ___________________________________________________________ ___________________________________________________________. Type of transaction: { } ordinary trade { } cross transaction This confirms that the two (2) parties involved in the transaction have agreed to the cancellation. Requesting Broker Contra-Broker Authorized Signatory Authorized Signatory ______________________ ______________________ Name and Position Name and Position ______________________ ______________________ Broker-Firm Broker-Firm Board Control Approval: For PSE Management Use Only: ____________________ Encoded by: Name & Signature _________________ MRTERM Operator ____________________ Name & Signature ____________________ Name & Signature ANNEX 4 PHILIPPINE STOCK EXCHANGE, INC. PSE Center, Exchange Road, Ortigas Complex, Pasig, Metro Manila Attn.: The Chief Operating Officer Subject : Letter Request for Amended DTR Gentlemen: Please amend our Daily Transaction Report (DTR) to reflect the changes on the P/C &/or F/L flags of the following transactions: Trade Date Order Security Number of Shares Contract Number P/C F/L Buy/Sell From To From To Reason/s: (with reference to the requested change of P/C &/or F/L flags) ____________________________________________________________________________ ____________________________________________________________________________ ___________________ Authorized Signatory ___________________ Broker-Firm N.B. P100 . 00 service fee for this request will be reflected in the Monthly Billing Statement . For PSE Management Only Noted/Approved by: _______________ Amendments Encoded by: ___________ ANNEX 5 PSE-TSD Form 4 Date: ___________ Philippine Stock Exchange, Inc. Philippine Stock Exchange Centre Exchange Road, Ortigas Center Pasig, Metro Manila Attention: The Floor Trading Arbitration Committee Gentlemen : May we request your assistance regarding our expected delayed deliveries with the following details: ISSUE :_____________________________ NUMBER OF SHARES :_______________ SETTLEMENT DATE :_________________ DELIVERY DATE :____________________ The reason/s for the above delay is/are as follow/s:______________________________ ____________________________________________________________________ ________________________________________. It is understood that, notwithstanding this letter and in case we cannot come up with the needed shares to deliver on due dates, the appropriate penalties and sanctions for delayed deliveries will still apply. This is not to be construed as a request for extension of settlement date . Thank you. Very truly yours, _____________________ (Name of Member-firm) _____________________ (Authorized Signature) Footnotes 1. Circular No. 247 Dec 16, 1997. 2. Special Block Sale, Circular # 286, July 11, 1995. 3. Change in Board Lots, Circular # 333, July 28, 1995. 4. Odd Lot Board, Circular #20, February 6, 1997. 5. Circular Nr 234 dated Nov 27, 1997. 6. Circular #171, May 10, 1996. 7. Circular #75, February 15, 1996. 8. Circular #10, January 8, 1996. 9. Monitoring Foreign Ownership, Circular #177, 4 September 1997. 10. Circular # 552, November 22, 1995. 11. Trading of Issues Reaching Ceiling or Floor Price Limits, Circular #21, February 6, 1997. 12. Subsection 1, under Trading Band and Price Freezing, Circular # 552, November 22, 1995. 13. Trading Halt in Relation to Disclosure Requirements and its subsections, Circular #559, November 27, 1995. 14. Trading on One Floor Only, Circular #67, April 21, 1997. 15. SEC BED Memorandum Circular No 5, PSE Circular # 237 Dec 3 1997. 16. Rules & Regulations Regarding Personnel Conduct On the Trading Floor with Subsections A & B, Circular # 35, January 25, 1995. 17. Circular No. 138, April 3, 1996, Series of 1996. 18. Circular 498, October 23, 1995, Series of 1995. 19. Circular No. 166, 24 March 1995, Series of 1995. 20. Revision of the Rule on Settlement of Transaction, Circular No. 149, 25 July 1997. 21. Circular #148 [Revision of the Rule on Settlement of Transaction], 25 July 1997. 22. Deadline for Deliver of PCD-Eligible Issues, Circular #33, 18 February 1997. 23. Addendum, Circular #259, July 12, 1996. 24. Circular # 237, May 29, 1995. 25. Rule on Defective Lodgments, Circular #148, 25 July 1997 as amended by Memorandum dated 29 September 1997. 26. Over-the-Counter clearing procedure, Circular #175, April 5, 1995. 27. Memorandum to member-brokers dated 29 September 1997. 28. Ex-Date of PCD-Eligible Shares, Circular #__, 11 June 1997. 29. Circular # 87, February 20, 1996. 30. Value Added Tax (VAT) on Commission, Circular # 257, 12 July 1996 31. Transfer Fees Payment, Circular #271, November 11, 1994. 32. Circular # 22 dated February 5, 1997. 33. BIR Revenue Regulations 3-95; PSE Circular # 401 September 8, 1995.