Establishment of a physical gold exchange remains up in the air after recent negotiations between the Stock Exchange of Thailand and gold dealers over management power ended in discord.
Despite a mutual agreement in principle to set up a spot gold exchange in Thailand, a tug-of-war between the SET and gold traders has made it impossible to occur this year.
MTS Gold president Kritcharat Hirunyasiri said questions of managerial power had not been settled yet.
"The SET has proposed taking a majority stake in the new exchange and requested the power to set its direction, while gold traders are concerned they could lose control of the exchange and see their benefits reduced," he said.
Kritcharat: Parties still talking
Mr Kritcharat described the process as moving at a snail's pace but said at least the SET and gold dealers were still talking.
Funding for the physical gold exchange is not a problem, as both sides have ample cash, he said, adding that setting it up would cost more than 1 billion baht.
The Gold Traders Association and gold futures brokers have agreed that 99.99% purity physical gold contracts will be priced and settled in major currencies, particularly US dollars, on the physical exchange to allow global investors access without foreign exchange risks.
Such a move would require central bank approval, but Mr Kritcharat said the Bank of Thailand would almost certainly allow trading in foreign currencies since gold was traded internationally.
"It's not proving easy for gold traders to have all their demands met. We need to speak more with other parties and try to finalise all the details as soon as possible," he said.
"Laws governing the new exchange are expected to be in place next year."
Tipsuda Thavaramara, deputy secretary-general of the Securities and Exchange Commission (SEC), said the securities watchdog was considering three options to make gold trading viable.
The first is amending laws governing the SET's business scope. This would allow the gold exchange to be set up immediately, but the SEC would have no supervisory authority since the SEC Act limits its power to securities trading alone.
The second option is to trade gold through depository receipts. This would be the most convenient alternative, as gold could be traded on the SET immediately, while the SEC would supervise the securities.
The third option is to set up a gold futures exchange and amend the law to allow trading physical gold and supervision. However, this would take the longest time.
Mrs Tipsuda said the SEC would support the idea of setting up a new gold exchange albeit on the condition that relevant parties — the SET, gold dealers and the Bank of Thailand — agreed on the exchange's structure and other details to pick the right option in making the new bourse viable and raising its competitiveness over time.