According to the rules, cash-account investors and those who trade via the Internet will need to deposit collateral with their securities companies of at least 10 per cent of their approved line, according to their financial status and ability to repay. This is to strengthen the stock trading system, ensuring that customers will be able to settle their payments on time, while making sure that they are not granted excessive credit lines.
Mr. Kittiratt said, “The SET board has agreed to allow each investor who might not have any collateral at all or have collateral of less than 10 per cent of their total credit line to trade stocks up to a maximum of 1,000,000 baht but not more than their credit limit. This new rule will be valid for 6 months, from 1 July 2004 through 31 December, 2004. However, member companies may grant this credit limit to their clients at their discretion.”
“The new rules are aimed at reducing misunderstanding of the implementation of the aforementioned regulations. For example, an investor may have sold all securities pledged as collateral on the previous working day and failed to pledge new collateral. Thus, he might not have enough money to trade.”
“To ensure that investors and all other parties concerned have the right perception of this issue, the SET held a meeting to clarify the 10-per-cent collateral regulations with staff of member companies in March. Moreover, the SET also distributed a VCD, explaining the principles and rationale behind the regulations for member companies in Bangkok and nationwide, so that their marketing staff would be able give appropriate advice to their customers.”
“In addition, the SET plans to give out 360,000 copies of pamphlets which contain all information to investors, and to clarify this issue through all media, as well as through its website www.set.or.th and www.settrade.com” said the SET president.
Types of collateral include cash, listed securities such as common or preferred stocks, warrants, treasury bills, government bonds, promissory notes, certificates of deposits issued by commercial banks or financial companies, or any other securities as stated in the Securities and Exchange Commission’s notifications on procedures relating to securities borrowing and lending and securities lending to non-institutional customers for short sale mutatis mutandis.
Types of customers that are exempt from pledging collateral are financial institutions as defined in the law on interest on loans of financial institutions, institutional investors as defined in SEC notification Kor Jor 44/2543 regarding filing for public offerings, private funds, members’ subsidiaries that hold, directly or indirectly, more than 90 per cent of the members’ paid-up capital, listed companies which are not in the REHABCO sector, etc.
