Analysts weigh impact of stock exchange’s one-share trading rule

THE Philippine Stock Exchange's (PSE) proposal to adopt a one-share board lot and revise runoff and trading-at-last rules could broaden retail participation, though analysts warn the changes may also lead to fragmented liquidity, execution challenges and higher operating costs for brokers.

- By Alexandria Grace C. Magno

“In theory, allowing investors to buy a single share improves accessibility and aligns the PSE with global practices, especially as digital platforms attract younger, smaller-ticket investors,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

“However, the trade-off is a higher risk of fragmented and choppy trading, as order books may become crowded with very small orders that add noise rather than depth,” he added.

In December, the PSE released proposed changes that would standardize the minimum lot size at one share for all listed securities, regardless of price. The move will effectively abolish the odd-lot market and lower the minimum capital required to buy any stock, as part of the exchange’s broader trading system upgrade.

Mr. Arce said overall participation might rise, but liquidity quality could initially deteriorate, particularly in thinly traded stocks where wider bid-ask spreads and sharper price movements are more likely.

“Much will depend on how brokers implement minimum order value policies and how quickly market participants adapt their order-routing and aggregation strategies,” he added.

Under the proposed amendments, the revised board lot will reduce the minimum investment for any security to its market price.