The resolution says that the SET will ask its member companies to call for 10% of the collateral worth of each cash account starting 1 December 2003 and increase this percentage to 25% from 1 January 2004 onwards.
"The SET Board considers that this will be advantageous to cope with the risks of the securities companies and the overall capital markets. The SET thus agrees to issue the SET regulation requiring SET members to start maintaining their cash accounts secured by collateral of 10% beginning from 1 December 2003 onwards. However, in allowing them to smoothly prepare all of the work systems necessary to serve a large number of investors, the SET therefore asks for the 10% collateral, for all cash accounts, to be ready by 31 March 2004. For the requested 25% collateral, SET members can begin applying this rule from 1 January 2004. Nevertheless, they should be all ready to act on this regulation by 31 December 2004. This schedule and plan are both well understood by the top SEC officials. The SET will invite all member companies to discuss the details of these practices at the Members' Special Meeting on Tuesday 18 November 2003 at 16:30 hours," Mr. Kittiratt said.
He went on to say that requiring cash account collateral will not affect market conditions since these practices are clear and provide a sufficient period for preparation. Investors will not be affected as this rule will not be applied to local and foreign institutions. For retail investors, effects will scarcely be observed since the collateral includes securities deposited with the securities companies and not just cash. Other securities that can be used as collateral are government bonds and investment units. "Please take this as good news because when this regulation has been implemented, it virtually assures that the net settlement revocation, that investors have been worried about, will not happen."
The SET President also added that the SET has been informed that the Association of Securities Companies (ASCO) is ready to support this decision and has already appointed a special committee to discuss the details of these practices and the preparation needed to undertake them. A series of meetings will be held to conclude all related details within this week.
