In my previous post, I introduced you to our stock market, the Philippine Stock Exchange (PSE).

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We’ve learned that only through PSE can we buy or sell stocks of publicly-listed companies in the Philippines. We also had some discussions about its functions, particularly about the PSE having a power to create and enforce its own rules, a privilege it uses to ensure a “fair, efficient, transparent and orderly market for the buying and selling of securities“.

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PSE also endeavors to improve financial literacy through various investor education programs.

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Lastly, we talked about the “market players” which include the PSE (as the owner of the stock market), the publicly-listed companies, stock brokers and investors (like us).

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Now, let us talk about the “T+3 Rule” and how we calculate for the net cost when we buy stocks, as well as the net proceeds we get when we sell stocks.

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REMEMBER THE “T+3”

When trading stocks through the PSE, you would never miss to hear something called “T+3”. What is it? It means Transaction Date (the “T”) plus 3 days (the “+3”).

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BUYING STOCKS. Let us say, you call your broker today, June 27, and tell him that you want him to buy 1,000 shares of Ayala Land (symbol: ALI) at Php15.50 per share. Then, let us assume that someone who has 1,000 shares of ALI sold his ALI shares to you (in stock market investing language, we say that “the order has been matched“) at Php15.50 per share. Do you have to pay your broker today? NO.

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In buying transactions, your broker will require you to pay for your order (i.e. to buy 1,000 shares of ALI at Php15.50 per share) or settle the bill “T+3” or three days after transaction date.

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That means, if you were able to buy on June 27, you have to pay your broker on June 30 the total amount of Php15,545.73 (we’ll discuss how this total cost was computed later).

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SELLING STOCKS. Now, let us say after a week, or on July 4, you decided to sell your 1,000 shares of ALI after the stock’s price suddenly went up to Php17 per share. You gave your broker a call and ask him to do just that. After a minute or so, the broker told you “SOLD!” Do you receive the proceeds from the sale (which amounts to Php16,864.85, computation to be discussed later) on the same day? NO.

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The broker will give you the net proceeds of Php16,864.85 T+3,, or on July 07.

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NOTES FOR INVESTORS. Why is it important to remember the T+3 rule? For example, you currently have shares in Globe Telecoms (symbol: GLO). But you saw that the developments in PLDT (symbol: TEL) are doing great, so, you decided that you want to buy PLDT today. But you don’t have cash today, so you decided to sell Globe today thinking that you can use the money to buy PLDT shares today. Is this possible under the T+3 rule? NO.

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In the case of online brokers, however, since you were already required to deposit money with them when you set up your account, you can forget about the T+3 in buying transactions because the broker will immediately deduct the amount from your cash balance.

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Also, some (NOT ALL) online brokers allow you to do what you intend to do in the Globe-PLDT example, i.e. use the cash from selling Globe today to buy PLDT today. But do note that even those online brokers that allow you to do that would only let you withdraw the proceeds (i.e. in case you changed your mind and decided to just withdraw the proceeds instead of buying PLDT shares) three days after you sold your Globe shares (i.e. T+3 still applies).

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HOW MUCH DO I PAY WHEN I BUY STOCKS?

Luckily, I have already talked about this in one of my posts. Please check “Watch out for stock trading costs“.

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In gist, when we buy stocks, our brokers charge us a fee, the government collects some taxes, and the PSE ask us to pay something for the use of their trading facility. In buying transactions, we can calculate the amount we pay our broker using this shortcut:

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Below is a screenshot of an actual trading confirmation sent by an online broker for a BUYING transaction:

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Based on the screenshot, the Net Amount to be paid to the broker for buying 10,000 shares of Megaworld (symbol: MEG) at Php1.34 per share is Php13,439.53.

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Using our shortcut, we can easily calculate for that amount: 10,000 x Php1.34 x 1.00295 = Php13,439.53.

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HOW MUCH DO I RECEIVE WHEN I SELL STOCKS?

When we sell stocks, same charges apply, except for taxes which is bigger since we are charged “Sales Tax” when we sell. We can easily calculate for the net proceeds when we sell our stocks using the following:

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Below is a screenshot of an actual trading confirmation sent by an online broker for a SELLING transaction:

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Based on the screenshot, the Net Amount that we receive from the broker after selling 300 shares of International Container Terminal Services, Inc. (symbol: ICT) at Php32 per share is Php9,523.68.

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Using our shortcut, Net Proceeds = 300 x Php32 x 0.99205 = Php9,523.68.

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To be continued….. (about Board Lot Table and the PSE index)

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Happy investing!

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>> back to Investor Education – Home

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