The Thailand Futures Exchange (TFEX) has asked the Bank of Thailand to raise the trading limit for US-dollar futures from $5 million per small and medium-sized enterprise (SME) to persuade them to use the product in hedging against currency risks.
The central bank's current restriction to allow each SME to trade dollar futures through TFEX at $5 million or about 5,000 contracts is deemed too small, TFEX managing director Rinjai Chakornpipat said yesterday.
She said the exchange had also requested the central bank allow individual investors to trade dollar futures.
"It does not make sense to limit dollar futures trading only to SMEs. The tradable size is also very small and not enough to cover risk, so SMEs prefer making hedging at banks," Ms Rinjai said.
A dollar futures contract allows an investor to buy or sell the dollar-baht exchange rate at a specified price and date in the future.
"The Bank of Thailand has lifted the dollar trading limit in the international market, so TFEX hopes the policymaker will consider widening the trading limit and allow individual investors to trade the product," said Ms Rinjai.
She said TFEX would next year focus on boosting trading liquidity for its existing products by increasing the number of market makers for products with low trading volume such as oil futures and SET50 index options.
"Market makers are very successful for derivatives warrants, so TFEX will use this measure for other inactive products," Ms Rinjai said.
TFEX hopes to raise its ranking in the global derivatives market by the US-based Futures Industry Association to 30th in the coming years from 32nd now. The ranking is based on trading volume.
As of August, TFEX had 25 million trading contracts, behind London Stock Exchange Group at 34 million.
TFEX's ranking has vaulted significantly from 45th last year among 70 futures markets.
Its average daily trading contracts surged 99.74% from the end of 2013 to 135,857 at the end of last month.
Stock futures and SET50 index futures were the most active products.
TFEX also targets raising foreign investors' trading ratio to 10-15% in the long run from 8% now.
It is considering a merger with the Agricultural Futures Exchange of Thailand, but it would take a long time to amend relevant laws.