By MAX ESTAYO

Small banks feel short changed by the rates imposed on trading in securities.

Banks before they can buy government or private debt papers have to be members of the Philippine Dealing Exchange.

PDEx in turn charges bank fees when they use the exchange’s trading platform.

On average PDEx earns P300,000 daily on fees roughly translating to income of P72 million per year.

But on top of what PDEx charges, there are fees and taxes that in the end hike the cost of borrowing, whether by government or the private sector.

Some lawmakers even suspect that lenders are asking for higher yields from the government borrowings because of the high trading charges they are levied.

The Bureau of Treasury has rejected most of the bids ls in the past two auctions.

Thrift banks are contesting a Securities and Exchange Commission regulation requiring banks must become a member of the Philippine Dealing Exchange first before they can trade government securities through the PDEx platform.

In a related development, Rep. Luis Villafuerte has filed a House resolution to investigate the fees PDEx charges banks.

The SEC has issued a notice on Feb. 1, giving PDEx a self-regulatory organization status and providing that only PDEx members be allowed to transact in the over-the-counter market.

The Chamber of Thrift Banks, the association of the country’s 82 thrift banks, in a position paper said the cost in joining PDEx is "prohibitive."

When thrift banks transact with PDEx, they are also made to pay ad valorem fees, which would jack up the transaction cost by 300 percent, CTB said.

CTB said PDEx, a private enterprise with the Bankers Association of the Philippines as among the owners, is earning at least P300,000 daily on the average daily transactions of P13 billion.

The thrift banks also said being made to report all their transactions to a central reporting platform would entail another cost, since the banks would need to set up additional infrastructure.

All these would have the effect of making the purchase of government securities more expensive, the banks said, since they would ultimately transfer the added costs to buyers of the securities.

In the House resolution, Rep. Villafuerte said the imposition of transaction fees may be impelling banks to "up their bids at the primary market."

The Bureau of Treasury had rejected all bids for treasury bonds and treasury bills during the last two auctions for the high rates demanded by banks.

When rates go up in the primary auction, that result in higher borrowing costs for the government.

The lawmaker also questioned the government securities market being under the regulatory ambit of the SEC when said securities are "exempt securities" under the Securities Regulation Code.

The thrift banks want the SEC to give them a grace period to decide whether to join PDEx considering the high membership cost.

The banks said they may be designated as qualified investors so they can continue to deal in the secondary market.

The banks are also requesting that they be charged lower transaction fees than the commercial banks.

PDEx has no other source of income than the fees from membership and transactions.