A New Gateway for Cross-Border Investing
In September 2026, the Securities and Exchange Commission granted DragonFi Securities Inc. admission to its Strategic Sandbox—known as Stratbox—under Memorandum Circular No. 9, Series of 2024. The approval made DragonFi the first licensed Philippine broker-dealer authorized to provide qualified investors with access to preapproved global equities and exchange-traded funds through over-the-counter depositary receipts (OTC DRs). The development represents a significant step toward integrating Philippine investors into the global active ETF ecosystem, even as domestic regulatory reforms move forward in parallel.
How the Framework Works
The sandbox framework ties an investor’s overseas investment limit directly to their Philippine holdings. Investors with certified domestic investments may access foreign offerings equivalent to as much as 50 percent of the value of those holdings, with the limit potentially reaching 100 percent for users maintaining Personal Equity and Retirement Account holdings. Through OTC DRs, investors can acquire Philippine-registered counterparts to underlying international assets, offering foreign securities exposure without directly transacting on overseas exchanges.
DragonFi holds international securities and cash under segregated custody arrangements with global financial institutions, while local client funds remain segregated and kept with licensed domestic institutions. This dual-custody structure is designed to mitigate cross-border settlement risks and align with Philippine regulatory expectations.
Strategic Implications for Active ETF Adoption
The DragonFi approval arrives at a moment when Philippine regulators are simultaneously liberalizing the domestic ETF framework to permit actively managed products. The convergence of these two developments—expanded global access and domestic active ETF authorization—creates a potentially powerful dynamic: Filipino investors could soon construct portfolios that combine locally listed active ETFs with globally diversified strategies accessed through OTC DRs.
DragonFi CEO Jon Carlo Lim emphasized that the framework is designed to complement rather than cannibalize domestic capital formation: “What makes this framework especially meaningful is that global access does not have to come at the expense of our own capital markets”. Lim added that the structure could help Filipinos diversify abroad while encouraging them to build their domestic investment portfolios.
SEC Oversight and Phased Rollout
SEC Commissioner McJill Bryant Fernandez noted that the sandbox tests could help the corporate regulator refine its rules while widening investment choices, particularly for retail investors. DragonFi will begin phased testing after submitting and validating its amended testing plan and client suitability protocols. The initial rollout will cover a closely monitored group of users, with any expansion remaining subject to further SEC review and approval.
The sandbox mechanism effectively allows the SEC to observe real-world investor behavior and operational risks before committing to permanent rule changes—a prudent approach given the cross-border complexities inherent in OTC DR structures.
Positioning for a More Flexible Investment Landscape
For Philippine investors accustomed to limited domestic product offerings, the DragonFi approval signals a gradual but tangible shift toward a more flexible investment architecture. Combined with the PSE’s proposed active ETF rules, the sandbox initiative suggests that Philippine regulators are pursuing a dual-track strategy: deepening domestic markets while selectively opening channels to global diversification.
Market participants will be watching closely to see whether the sandbox yields sufficient data to justify broader liberalization—and whether asset managers respond by developing active ETF strategies that can compete for investor attention alongside newly accessible global alternatives.
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