'04 
JUN 30 P 4  :18 
THIRTEENTH CONGRESS OF THE REPUBLl 
OF THE PHILIPPINES 
First Regular Session 
S E N A T  
s. No. 
Introduced by Senator S. R. Osmefia 111 
' I  . 
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EXPLANATORY NOT 
In advanced countries, the market for commodity futures made a significant 
contribution to the development of the agricultural sector. 
In the Philippines, the 
development of a market commodity futures could be an effective measure to link the 
farmer to the market for his products, and transform him from a subsistence producer 
to an entrepreneur. 
Agriculture is also extremely vulnerable to risks associated with wide 
fluctuations in market prices. With a commodity futures market, a farmer who expects 
to harvest a crop six months into the future can sell a contract for future delivery at 
stipulated prices. This provides him with a hedge that protects him from the 
fluctuations of prices in the spot markets. With a guaranteed buyer at a pre-fixed 
price, the farmer can devote his attention on producing his crop, without having to 
worry about finding a buyer at harvest time, or about the risk of lower prices that could 
wipe out the investments that he has sunk into his crop. 
This bill seeks to strengthen the commodity futures market in the Philippines 
through amendments in the Revised Securities Act to provide protection for trading 
participants, enable the market to be more independent, and bolster public confidence 
in the domestic futures market. 
In view of the foregoing, early passage of this bill is earnestly requested. 
k 
SERGIO OSMERA 111 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
) 
First Regular Session 
) 
”84 JUN 30 p4 :lo 
OF THE PHILIPPINES 
~~ 
Introduced by Senator S. R. Osmeiia 111 
AN ACT 
TO AMEND CERTAIN PROVISIONS OF THE REVISED SECURITIES 
ACT 
REGARDING 
FUTURES 
TRADING, 
AND 
FOR 
OTHER 
PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assembled: 
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SECTION q. Section 7 of Batas Pambansa Blg. 178, otherwise known 
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as the “Revised Securities Act,” is hereby amended to read as follows: 
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“Section 7. Commodity Futures Contracts. - Notwithstanding the 
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provisions of paragraph (a) Section 4 and of Sections 5 and 6 regarding 
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exemptions, commodity futures contracts may be registered, or otherwise 
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regulated, and futures commission merchants, futures brokers, floor 
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brokers, pool operators and advisors licensed and supervised in 
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accordance with the rules and regulations that shall be promulgated in 
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the public interest and for the protection of investors by the Commission, 
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with the approval of the Monetary Board of the [Central Bank of the 
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Philippines.] BANGKO SENTRAL NG PILIPINAS, WITH RESPECT TO 
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PROVISIONS AFFECTING CREDIT AND MONETARY POLICY. Such 
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rules and regulations [may, among other things, provide for the 
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establishment and maintenance by futures commission merchants, future 
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brokers, pool operators and advisors of bank accounts exclusively for 
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margin deposit of and/or other receipts from customers, the monitoring 


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of withdrawals from such account through periodic reports 
and/or 
examination, the requirement that at least one (1) of the signatories to 
fund withdrawals from such account must be a Filipino citizen and a 
resident of the Philippines, 
the posting by futures commission 
merchants, futures brokers, floor brokers, pool operators and advisors 
of a bond in an amount sufficient to meet possible claims against them, 
taking into account the volume of marking deposits held by the 
establishment of a common compensation fund to be contributed by all 
futures commission merchants, 
futures brokers, 
floor brokers, pool 
operators and advisors of official receipts to evidence commissions 
received by them from customers] shall among others, provide for: 
(A.) THE 
REGISTRATION, 
REGULATION, 
LICENSING 
AND 
SUPERVISION OF A COMMODITY FUTURES EXCHANGE, 
COMMODITY FUTURES CONTRACTS, FUTURE COMMISSION 
.
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MERCHANTS, FUTURE BROKERS, FLOOR BROKERS, POOL 
OPERATORS AND ADVISORS; 
(8.) 
THE REGISTRATION OF EVERY MEMBER OF THE COMMODITY 
FUTURES 
EXCHANGE, 
NOTWITHSTANDING 
ANY 
CLASS I F I CAT1 0 N 0 F MEMBERS H I P ; 
(C.) THE ESTABLISHMENT, REGISTRATION AND REGULATION OF 
AN INDEPENDENT CLEARING HOUSE CORPORATION, WHOSE 
DIRECTORS AND OWNERS SHALL NOT BE INTERLOCKING 
WITH THOSE OF THE COMMODITY FUTURES EXCHANGE, AND 
WHOSE FUNCTIONS SHALL BE TO RECORD AND RESITER ALL 
TRANSACTIONS IN THE FUTURES EXCHANGE, COLLECT 
MARGIN DEPOSITS ON EVERY CONTRACT REGISTERED WITH 
THE FUTURES EXCHANGE, 
KEEP SAID DEPOSITS IN 
SEPARATE BANK ACCOUNTS TO BE RELEASED ONLY UPON 
LIQUIDATION OR SETTLEMENT OF THE CORRESPONDING 
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CONTRACT, 
AND GUARANTEE THE PERFORMANCE OF 
EVERY CONTRACT; 
(D.) THE ESTABLISHMENT 
AND MAINTENANCE BY FUTURE 
COMMISSION MERCHANTS, FUTURE BROKERS, 
FLOOR 
BROKERS, POOL OPERATORS AND ADVISORS OF BANK 
ACCOUNTS EXCLUSIVELY FRO MARGIN DEPOSIT OF AND.OR 
OTHER RECEIPTS FROM CUSTOMERS, THE MONITORING OF 
WITHDRAWALS FROM SUCH ACCOUNT THROUGH PERIODIC 
REPORTS AND/OR EXAMINATION, THE REQUIREMENT THAT 
AT 
LEAST ONE (1) 
OF THESGINATORIES TO 
FUND 
WITHDRAWALS FROM SUCH ACCOUNT MUST BE A FILIPINO 
CITIZEN AND A RESIDENT OF THE PHILIPPINES; 
(E.) THE ESTABLISHMENT OF A TRADING SYSTEM THAT WILL 
ENSURE THE OPERATION OF A FREE AND INDEPENDENT 
MARKET NOT SUBJECT TO MANIPULATION OF PRICES; 
(F.) THE 
PROTECTION 
OF 
INVESTORS/CLIENTS 
AGAINST 
.
,
 
UNCONTROLLED CROSS TRADING BY HOUSE ACCOUNTS OF 
BROKERS; 
(G.) THE ASSURANCE THAT A TRADER CAN LIQUIDATE OR SETTLE 
ITS POSITION ANYTIME; 
(H.) THE POSTING OF FUTURES COMMISSION MERCHANTS, 
FUTURE BROKERS,FLOOR BROKERS, 
POOL OPERATORS 
AND ADVISORS OF A BOND IN AN AMOUNT SUFFICIENT TO 
MEET POSSIBLE CLAIMS AGAINST THEM, TAKING INTO 
ACCOUNT THE VOLUME OF MARGIN DEPOSITS HELD BY 
THEM; 
(I.) 
THE ESTABLISHMENT OF A COMMON COMPENSATION FUND 
TO 
BE CONTRIBUTED BY ALL FUTURES COMMISSION 
MERCHANTS, FUTURES BROKERS, FLOOR BROKERS, POOL 
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OPERATORS AND ADVISORS, 
AND SUCH FUND BEING 
SUBJECT TO THE CONTROL AND SUPERVISION OF THE 
COMMISSION; 
(J.) THE REGISTRATION AND USE BY FUTURES COMMISSION 
MERCHANTS, FUTURE BROKERS, FLOOR BROKERS, POOL 
OPERATORS AND ADVISORS, 
OF OFFICIAL RECEIPTS TO 
EVIDENCE 
COMMISSIONS 
RECEIVED 
BY 
THEM 
FROM 
CUSTOMERS; 
(K.) THE 
INCLUSION IN EVERY CONTRACT BETWEEN THE 
CUSTOMERS 
AND FUTURES COMMISSION MERCHANTS, 
FUTURES BROKERS, FLOOR BROKERS, POOL OPERATORS 
AND ADVISORS, 
OF A RISK DISCLOSURE PROVISION TO 
INFORM THE CUSTOMERS OF THE RISKS INVOLVED IN 
FUTURES TRADING; AND 
(L.) THE REQUIREMENT 
THAT FUTURES EXCHANGE AND 
FUTURES BROKERS AND COMMISSION MERCHANTS SHALL 
EDUCATE THE INVESTING PUBLIC ON THE RISKS INVOLVED 
IN FUTURES TRADING TO 
ENSURE THAT 
BEFORE A 
CUSTOMER STARTS TRADING HE IS FULLY AWARE OF. THE 
NATURE OF FUTURES TRADING. 
However, the Commission shall, after proper notice and opportunity 
for hearing, prohibit transactions with respect to all or specified 
commodity futures contracts if it shall find that such transactions will be 
inimical to the economic interest of the country or may cause grave and 
irreparable injury or prejudice to the investing public.” 
SECTION 2. Rules and Regulations. - The Securities and Exchange 
Commission shall promulgate, after conducting public hearings, the rules and 
regulations to implement the provisions hereof, within six (6) months from the 
approval of this Act. 
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SECTION 3. Repealing Clause. - All laws, decrees, orders, rules and 
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regulations and other issuances inconsistent with the provisions of this Act are 
deemed modified, revoked or repealed accordingly. 
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SECTION 4. Separabilify Clause. If any section or provision of this Act 
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shall be declared unconstitutional or invalid, the other sections or provisions not 
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affected thereby shall remain in full force and effect 
SECTION 5. Effecfivify. This Act shall take effect fifteen (15) days after 
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its publication in two (2) leading newspapers of national circulation. 
Approved, 
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