Thailand Stock Exchange shakes up trading oversight

The Thailand Stock Exchange (SET) has launched a series of initiatives to bolster trading oversight and refine company listing criteria. This move is to regain investor confidence, following a 15.5% negative return last year, the worst performance globally among stock exchanges.

Foreign investors offloaded 192 billion baht worth of Thai shares last year, with this trend continuing into the first two months of 2024. In addition, retail investor trading saw a significant decrease, exacerbated by a range of internal factors that undermined market confidence.

Discontent has been voiced by retail investors over program trading, particularly the use of high-frequency trading (HFT) programs by foreign investors. They argue that naked short selling is taking place, a practice whereby shares are short sold that have not been definitively established to exist, an act that contravenes SET rules. The SET has consistently denied discovering any evidence of this.

Average trading value has receded to between 35-50 billion baht per day, down from the previous 50 billion. The SET has been collaborating with international consultancy, Oliver Wyman, since late last year to investigate and pinpoint solutions to bolster its oversight and resurrect market confidence.

The study was completed in early February and was given approval by the SET board and the Securities and Exchange Commission (SEC). Following a string of public hearings, the new initiatives are scheduled to be gradually rolled out from today onwards.

The initiatives include increased oversight of short selling and program trading, alongside stricter information disclosure and listing rules. Other changes include increased penalties and fines for brokers, the development of a central system for members to check securities information and verify investor securities existence, and tighter supervision of HFT investor groups.

Operating systems

SET President Pakorn Peetathawatchai commented that the SET is joining forces with the SEC to review and amend various criteria to ensure timely execution. He added that some changes will require detailed consultation with relevant parties, including member companies, and may necessitate preparation and adjustment of operating systems.

Analysts believe the SET’s increased supervision of listed companies should bolster market confidence. Koraphat Vorachet, head of the research department at Krungsri Capital Securities, expressed optimism that the new measures could significantly elevate confidence in the Thai stock market, reported Bangkok Post.

He pointed out that the measures regarding short selling could assure investors that the securities exist, removing the possibility of naked short selling. The measures to control program trading could potentially decrease market volatility and speculative trading, allowing investors to focus on stock fundamentals.

Kitpon Praipaisarnkit, Vice-President at UOB Kay Hian Securities (Thailand), agreed the oversight of short selling and program trading should enhance investor confidence.

“The shift should bring positive sentiment to the stock market. We have to see how investors react to the new measures.”