SET proposes market cap rise for short selling, higher fines for violations

The Stock Exchange of Thailand (SET) proposed a rise in the stock market capitalisation requirement for securities eligible for short selling, along with a threefold increase in fines for rule violations. This move forms part of the SET’s strategy to enhance market supervision and bolster investor confidence.

These changes, which are subject to a public hearing, propose to raise the market capitalisation requirement from the current 5 billion baht to 7.5 billion. The new measures also include the introduction of a stock liquidity rule, requiring businesses to have a monthly trading volume exceeding 2% of monthly turnover in those securities, reported Bangkok Post.

The SET statement further revealed plans to instate additional criteria to mitigate the impacts of short selling. For instance, if a stock’s price falls by over 10% from the previous day’s closing figures, the short sale price must be higher than the latest price under the uptick rule. This rule, a prevalent financial regulation, stipulates that short sales must be conducted at a higher price than the preceding trade.

Moreover, the SET intends to impose a daily limit on the short-selling of securities and increase the daily disclosure of accumulated short-selling volume that remains unpurchased (outstanding) for each security.

“If there are violations of the short selling rules, the fines imposed on violators will be three times higher, in line with the guidelines of leading stock exchanges abroad.”

The SET also plans to enhance the orderly program trading on the exchange to curb abnormal price fluctuations.

“An intra-day ceiling for price movements [dynamic price band] will be set to narrow the movement between the ceiling and floor prices that is currently in use.”

In addition, the SET is keen on improving its surveillance of trading orders that influence the market, in terms of both quantity and price, by developing a central screening system to prevent excessively frequent order placements.

The bourse also outlined plans to implement an auto-halt for individual securities if they are bought or sold in quantities exceeding the specified level.

Investors intending to engage in high-frequency trading will be required to register with the SET for monitoring purposes. The names of investors identified as engaging in inappropriate trading behaviour will be disclosed to all member companies for consideration in actions such as reducing the investor’s credit limit or requiring trading via an investment advisor.