The Securities and Exchange Commission (SEC) will allow issuance of business licences for electronic trading platforms (ETP) to securities companies, but such trading will initially operate in a regulatory sandbox.
The SEC has been conducting a public hearing on ETP trading since April this year and is now concluding the process, with issuance of licences expected later this year, said SEC assistant secretary-general Sakkarin Ruamrangsri.
ETP is a kind of online securities trading system in which the operator can store trading data and information pertaining to trade products.
ETP typically streams live market prices to allow users to trade, and it may provide additional trading tools such as charting packages, news feeds and account management functions.
"Online trading is a trend many stock markets have adopted because of how the new technological platform supporting new trading behaviour," said Mr Sakkarin.
The SEC already allowed robotic trading or algorithmic trading, which many brokerages use. Those securities firms have to respond on a trading programme in case of a market crash, as collateral damage could take a toll on the trading platform programme.
Algorithmic trading or high-frequency trading has been documented as a source of market crashes because the programmes are set to take extreme buy or sell positions based on market conditions and changes in share prices.
For example, the subprime crisis in 2008 was triggered by stock markets in eurozone countries and the US crashing as a result of panic selling by online trading platforms.
"The SEC will initially allow businesses [involved with ETP] to operate in a regulatory sandbox," said Mr Sakkarin.
If the stock market is negatively affected by ETP trading, then such persons responsible will be liable for a criminal offence."
The SEC Act of 2016 emphasises protecting investors, including over unfair trading, disclosure of false information, insider trading and share manipulation. It increases the civil penalty for such offences and allows lawsuits to be filed quicker than in the past, he said.