EN BANC

Makati Stock Exchange, upon challenging this particular requirement of the

Commission (rule against double listing) may be deemed to have shown
inability or refusal to abide by its rules, and thereby to have given ground for
denying registration. [sec. 17(a) (1) and (d)].

[G.R. No. L-23004. June 30, 1965.]

MAKATI STOCK EXCHANGE, INC., Petitioner, v. SECURITIES AND
EXCHANGE COMMISSION and MANILA STOCK
EXCHANGE, Respondents.

Such rule provides: ". . . nor shall a security already listed in any securities
exchange be listed anew in any other securities exchange . . ."cralaw
virtua1aw library

Hermenegildo B. Reyes for Petitioner.

Solicitor General for respondent Securities and Exchange
Commission.
Norberto J. Quisumbing and Emma Quisumbing-Fernando for
respondent Manila Stock Exchange.

SYLLABUS

1. SECURITIES AND EXCHANGE COMMISSION; MAY NOT PROHIBIT

DOUBLE LISTING OF SECURITIES IN STOCK EXCHANGES. The
Securities and Exchange Commissions rule that a security already listed in
any securities exchange may not be listed anew in any other securities
exchange is beyond the power of the Commission to impose because it
results in discrimination and violation of constitutional rights.
2. ID.; ID.; PROHIBITION AGAINST DOUBLE LISTING AS CONDITION
FOR LICENSING OF STOCK EXCHANGE. The Securities and
Exchange Commission may not validly impose as a condition precedent for
the licensing of a stock exchange its rule against double listing of securities.

The objection of Makati Stock Exchange, Inc., to this rule is understandable.

There is actually only one securities exchange The Manila Stock
Exchange, that has been operating alone for the past 25 years; and all
or presumably all available or worthwhile securities for trading in the
market are now listed there. In effect, the Commission permits the Makati
Exchange, Inc., to deal only with other securities. Which is tantamount to
permitting a store to open provided it sells only those goods not sold in other
stores. And if theres only one existing store, 1 the result is a monopoly.
It is not far-fetched to assert as petitioner does 2 that for all practical
purposes, the Commissions order or resolution, would make it impossible
for the Makati Stock Exchange to operate. So, its "permission" amounted to
a "prohibition."
Apparently, the Commission acted "in the public interest." 3 Hence, it is
pertinent to inquire whether the Commission may "in the public interest"
prohibit (or make impossible) the establishment of another stock exchange
(besides the Manila Stock Exchange), on the ground that the operation of
two or more exchanges adversely affects the public interest.
At first glance, the answer should be in the negative, because the law itself
contemplated, and, therefore, tacitly permitted or tolerated at least, the
operation of two or more exchanges.
"Wherever two or more exchanges exist, the Commission, by order, shall
require and enforce uniformity of trading regulations in and/or between said
exchanges." [Italics Ours] (Sec. 28b-13, Securities Act.)

DECISION

BENGZON, J.:

This is a review of the resolution of the Securities and Exchange

Commission which would deny the Makati Stock Exchange, Inc., permission
to operate a stock exchange unless it agreed not to list for trading on its
board, securities already listed in the Manila Stock Exchange.
Objecting to the requirement, Makati Stock Exchange, Inc., contends that
the Commission has no power to impose it and that, anyway, it is illegal,
discriminatory and unjust.
Under the law, no stock exchange may do business in the Philippines unless
it is previously registered with the Commission by filing a statement
containing the information described in sec. 17 of the Securities act
(Commonwealth Act 83, as amended).
It is assumed that the Commission may permit registration if the section is
complied with; if not, it may refuse. And there is now no question that the
section has been complied with, or would be complied with, except that the

In fact, as admitted by respondents, there were five stock exchanges in

Manila, before the Pacific War (p. 10, brief), when the Securities Act was
approved or amended. (Respondent Commission even admits that dual
listing was practiced then.) So if the existence of more than one exchange
were contrary to public interest, it is strange that the Congress having from
time to time enacted legislation amending the Securities Act, 4 has not
bared multiplicity of exchanges.
Forgetting for the moment the monopolistic aspect of the Commissions
resolution, let us examine the authority of the Commission to promulgate
and implement the rule in question.
It is fundamental that an administrative officer has only such powers as are
expressly granted to him by the statute, and these necessarily implied in the
exercise thereof.
In its brief and its resolution now subject to review, the Commission cites no
provision expressly supporting its rule. Nevertheless, it suggests that the
power is "necessary for the execution of the functions vested in it" ; but it
makes no explanation, perhaps relying on the reasons advanced in support
of its position that trading of the same securities in two or more stock

exchanges, fails to give protection to the investors, besides contravening

public interest. (Of this, we shall treat later.)
On the legality of its rule, the Commissions argument is that: (a) it was
approved by the Department Head before the War; and (b) it is not in
conflict with the provisions of the Securities Act. In our opinion, the approval
of the Department, 5 by itself, adds no weight in a judicial litigation; and the
test is not whether the Act forbids the Commission from imposing a
prohibition; but whether it empowers the Commission to prohibit. No specific
portion of the statute has been cited to uphold this power. It is not found in
sec. 28 (of the Securities Act), which is entitled "Powers (of the Commission)
with respect to Exchanges and Securities." 6
According to many court precedents, the general power to "regulate" which
the Commission has (Sec. 33) does not imply authority to prohibit. 7
The Manila Stock Exchange, obviously the beneficiary of the disputed rule,
contends that the power may be inferred from the express power of the
Commission to suspend trading in a security, under said sec. 28 which reads
partly:jgc:chanrobles.com.ph
". . . and if in its opinion, the public interest so requires, summarily to
suspending trading in any registered security on any securities exchange. . .
." (Sec. 28(3), Securities Act.)
However, the Commission has not acted nor claimed to have acted in
pursuance of such authority, for the simple reason that suspension under it,
may only be for ten days. Indeed, this section, if applicable, precisely argues
against the position of the Commission because the "suspension", if it is,
and as applied to Makati Stock Exchange, continues for an indefinite period,
if not forever; whereas this section 28 authorizes suspension for ten days
only. Besides, the suspension of trading in the security should not be on one
exchange only, but on all exchanges; bearing in mind that suspension
should be ordered "for the protection of investors" (first par., sec. 28) in all
exchanges, naturally, and "if the public interest so requires" [sec. 28(3)].
This brings up the Commissions principal conclusions underlying its
determination, viz, (a) that the establishment of another exchange in the
environs of Manila would be inimical to the public interest; and (b) that
double or multiple listing of securities should be prohibited for the "protection
of the investors."cralaw virtua1aw library
(a) Public Interest. Having already adverted to this aspect of the matter,
and the emerging monopoly of the Manila Stock Exchange, we may, at this
juncture, emphasize that by restricting free competition in the marketing of
stocks, and depriving the public of the advantages thereof, the Commission
all but permits what the law punishes as monopolies as "crimes against
public interest." 8
"A stock exchange is essentially monopolistic" the Commission states in its
resolution (p. 14-a, Appendix, Brief for Petitioner). This reveals the basic
foundation of the Commissions process of reasoning. And yet, a few pages
afterwards, it recalls the benefits to be derived "from the existence of two or
more exchanges", and the desirability of "a healthy and fair competition in
the securities market", even as it expresses the belief that "a fair field of
competition among stock exchanges should be encouraged" ; only to
resolve, paradoxically enough, that Manila Stock Exchange shall, in effect,
continue to be the only stock exchange in Manila or in the Philippines.

our . . . unlisted industries and enterprises."cralaw virtua1aw library

"Double listing of a security," explains the Commission, "divides the sellers
and the buyers, thus destroying the essence of a stock exchange as a twoway auction market for the securities, where all the buyers and sellers in one
geographical area converge in one defined place, and the bidders compete
with each other to purchase the security at the lowest possible price and
those seeking to sell it compete with each other to get the highest price
therefor. In this sense, a stock exchange is essentially monopolistic."cralaw
virtua1aw library
Inconclusive premises, for sure. For it is debatable whether the buyer of
stock may get the lowest price where all the sellers assemble in only one
place. The price there, in one sale, will tend to fix the price for the
succeeding sales, and he has no chance to get a lower price except at
another stock exchange. Therefore, the arrangement desired by the
Commission may, at most, be beneficial to sellers of stock not to buyers;
although what applies to buyers, should obtain equally as to sellers
(looking for higher prices). Besides, there is the brokerage fee, which must
be considered. Not to mention the personality of the broker.
(b) Protection of investors. At any rate, supposing the arrangement
contemplated is beneficial to investors (as the Commission says), it is to be
doubted whether it is "necessary" for their "protection" within the purview of
the Securities Act. As the purpose of the Act is to give adequate and
effective protection to the investing public against fraudulent
representations, or false promises, and the imposition of worthless ventures
9 , it is hard to see how the proposed concentration of the market, has a
necessary bearing to the prevention of deceptive devices or unlawful
practices. For it is not mere semantics to declare that acts for the protection
of investors are necessarily beneficial to them; but not everything beneficial
to them is necessary for their protection.
And yet, the Commission realizes that if there were two or more exchanges
"the same security may sell for more in one exchange and sell for less in the
other. Variance in price of the same security would be the rule . . ." Needless
to add, the brokerage rates will also differ.
This precisely, strengthens the objection to the Commissions ruling. Such
difference in prices and rates gives the buyer of shares alternative options,
with the opportunity to invest at lower expense; and the seller, to dispose at
higher prices. Consequently, for the investors benefit (protection is not the
word), duality of listing 10 should be permitted, nay, encouraged, and other
exchanges allowed to operate. The circumstance that some people "made a
lot of money due to the difference in prices of securities traded in the stock
exchanges of Manila before the war" as the Commission noted, furnishes no
sufficient reason to let one exchange corner the market. If there was undue
manipulation or unfair advantage in exchange trading the Commission
should have other means to correct the specific abuses.
Granted that, as the Commission observes, "what the country needs is not
another" market for securities already listed on the Manila Stock Exchange,
but "one that would focus its attention and energies to the listing, of new
securities and thus effectively help in raising capital sorely needed by

Nonetheless, we discover no legal authority for it to shore up (and stifle) free

enterprise and individual liberty along channels leading to that economic
desideratum. 11
The Legislature has specified the conditions under which a stock exchange
may legally obtain a permit (sec. 17, Securities Act); it is not for the
Commission to impose others. If the existence of two competing exchanges
jeopardizes public interest which is doubtful let the Congress speak.
12 Undoubtedly, the opinion and recommendations of the Commission will
be given weight by the Legislature, in judging whether or not to restrict
individual enterprises and business opportunities. But until otherwise
directed by law, the operation of exchanges should not be so regulated as
practically to create a monopoly by preventing the establishment of other
stock exchanges, and thereby contravening.
(a) the organizers (Makatis) Constitutional right to equality before the law;
(b) their guaranteed civil liberty to pursue any lawful employment or trade;
and
(c) the investors right to choose where to buy or to sell, and his privilege to
select the brokers in his employment. 13
And no extended elucidation is needed to conclude that for a licensing
officer to deny license solely on the basis of what he believes is best for the
economy or the country, may amount to regimentation or, in this instance,
the exercise of undelegated legislative powers and discretion.
Thus, it has been held that where the licensing statute does not expressly or
impliedly authorize the officer in charge, he may not refuse to grant a license
simply on the ground that a sufficient number of licenses to serve the needs
of the public, have already been issued, (53 C.J.S. p. 636.)
Concerning res judicata. Calling attention to the Commission order of
May 27, 1963, which Makati Stock did not appeal, the Manila Stock
Exchange pleads the doctrine of res judicata 14 (The order now reviewed is
dated May 7, 1964.)
It appears that when Makati Stock Exchange, Inc. presented its articles of
incorporation to the Commission, the later, after making some inquiries,
issued on May 27, 1963, an order reading as follows.
"Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be
issued, and if the organizers thereof are willing to abide by the foregoing
conditions, they may file the proper application for the registration and
licensing of the said Exchange."cralaw virtua1aw library
In that order, the Commission advanced the opinion that "it would permit the
establishment and operation of the proposed Makati Stock Exchange,
provided . . . it shall not list for trading on its board, securities already listed
in The Manila Stock Exchange . . ."cralaw virtua1aw library

Admittedly, Makati Stock Exchange, Inc., has not appealed from that order
of May 27, 1963. Now, Manila Stock insists on res judicata.
Why should Makati have appealed? It got the certificate of incorporation
which it wanted. The condition or proviso mentioned would only apply if and
when it subsequently filed the application for registration as stock exchange.
It had not yet applied. It was not the time to question the condition; 15
Makati was still exploring the convenience of soliciting the permit to operate
subject to that condition. And it could have logically thought that, since the
condition did not affect its articles of incorporation, it should not appeal the
order (of May 27, 1963) which after all, granted the certificate of
incorporation (corporate existence) it wanted at that time.
And when the Makati Stock Exchange finally found that it could not
successfully operate with the condition attached, it took the issue by the
horns, and expressing its desire for registration and license, it requested that
the condition (against double listing) be dispensed with. The order of the
Commission denying such request is dated May 7, 1964, and is now under
review.
Indeed, there can be no valid objection to the discussion of this issue of
double listing now, 16 because even if the Makati Stock Exchange, Inc. may
be held to have accepted the permission to operate with the condition
against double listing (for having failed to appeal the order of May 27, 1963),
Still it was not precluded from afterwards contesting 17 the validity of such
condition or rule:jgc:chanrobles.com.ph
"(1) An Agreement (which shall not be construed as a waiver of any
constitutional right or any right to contest the validity of any rule or
regulation) to comply and to enforce so far as is within its powers,
compliance by its members, with the provisions of this Act, and any
amendment thereto, and any rule or regulation made or to be made
thereunder. (Sec. 17-a-1, Securities Act) [Italics Ours].)
Surely, this petition for review has suitably been coursed. And making
reasonable allowances for the presumption of regularity and validity of
administrative action, we feel constrained to reach the conclusion that the
respondent Commission possesses no power to impose the condition or
rule, which, additionally, results in discrimination and violation of
constitutional rights.
ACCORDINGLY, the license of the petitioner to operate a stock exchange is
approved without such condition. Costs shall be paid by the Manila Stock
Exchange. So ordered.
Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala,
Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.
Barrera, J., is on leave.