Thai Bourse Amends Trading Rules To Ease Investment

The Stock Exchange of Thailand (SET) will amend three key trading rules, increasing the attractiveness of the Thai market to investors and simplifying their portfolio management, SET Executive Vice President Mr. Suthichai Chitvanich stated today.

The amendments, which come into effect on July 3, 2006 are:

1. Raising the priority of order matching for at-the-open (ATO) and at-the-close (ATC) orders.
2. Permitting brokers to submit “basket orders”, each containing several simultaneous trading orders.
3. Permitting brokers to submit trading orders using the Volume Weighted Average Price Program (VWAP).

“Making the ATO and ATC orders the first priority to be matched before limited-price orders will benefit investors, as they will be able to trade securities at either opening or closing prices at their discretion. Additionally, their orders will be matched at price levels appropriate to their risk preference. Currently a limit price order, which may be higher or lower than the market price, is matched as a first priority ”, Mr. Suthichai said.

Raising the priority of order-matching will not affect opening and closing prices. Nevertheless, the number of shares and orders matched simultaneously may be outside the current regulations, thus the amendments.

Furthermore, ATO and ATC orders may be made on-line, just like any other internet trade, provided the screening system is in place to prevent inappropriate orders being transmitted.

“Allowing ‘basket orders’ and trading via VWAP will help SET member companies to better manage their clients’ orders, and assist investors in controlling their risk exposure. The amendments bring the Thai market more into line with international markets, easing the way for both foreign and local investors,” said Mr. Suthichai.

Allowing basket orders will be especially useful for index arbitrage and hedging, and will be attractive for asset management companies with index-linked managed funds. The amendments will boost the participation of institutional investors and development of the derivatives market.

A basket order must involve more than 10 securities, all of which must be listed in SET50 Index, and collectively worth at least THB 15 million. The price specified in a basket order must be within 2% of each security’s most recent price, to avoid any major market disturbance.

Sending orders via VWAP assures brokers that their trades are precisely or approximately at the volume-weighted average price of the securities.

“In summary, amending these three trading regulations eases investment and thus boosts the attractiveness of the Thai market,” SET EVP concluded.