Thai stock exchange to tighten short sales and program trading rules

The Stock Exchange of Thailand (SET) is set to introduce stricter regulations on short sales and program trading, aiming to mitigate securities price volatility and bolster the long-term resilience of the market. This decision follows a comprehensive study conducted by an external advisor, which found the SET’s market surveillance system to be on par with regional standards, as per a recent SET statement.

The study centred on short selling and program trading regulations and guidelines employed by the SET, comparing them with those used by other international stock exchanges. These included both developed markets and those on a similar developmental level as Thailand. The objective was to enhance trading transparency and fairness for all investors, reported Bangkok Post.

“The study found that overall, the Thai bourse has regulations and guidelines in place to supervise short selling and program trading that are comparable with peer exchanges,” the statement noted.

“However, the advisor has additional suggestions for the SET to consider in order to strengthen the supervision of such matters to suit the situation in the country.”

The advisor proposed updates in four key areas: control, reporting, monitoring and enforcement, and division of responsibilities. In terms of control, the SET has been advised to enhance program trading control mechanisms and reduce securities price volatility. This would involve establishing guidelines for tracking short-selling transactions and implementing a price control mechanism.

In the realm of reporting, the advisor recommended the SET simplify short-selling reports, making them more comprehensible regarding details and follow-up processes, including public disclosure.

As for monitoring and enforcement, the SET should intensify its focus on member companies ensuring investor compliance, including stricter punishment, as per the advisor.

Regarding the division of responsibilities, the advisor suggested the SET demarcate the duties of the market regulator and the stock exchange in supervising short selling and program trading in line with international standards. This would enable regulatory agencies to take swift, direct action against violators.

These suggested improvements in the four operational areas would allow the SET to safeguard more effectively against naked short-selling transactions and inappropriate program trading transactions in the future, the statement noted.

The SET’s board of directors reviewed these recommendations and instructed the SET to formulate proposals for improving relevant rules and guidelines. The SET plans to discuss these matters with the Securities and Exchange Commission and related parties to expedite action on these measures as soon as possible.