From auction trading in 1975 to computer matching in 1991 and then SET Connect in 2012, the Stock Exchange of Thailand has now implemented three securities trading systems for investors during its 37-year history.
SET Connect was just installed on Sept 3 in preparation for high-frequency trading (HFT) next year.
It offers a greater capacity and superior transaction speed and provides the use of industry-standard interfaces, making it easier to accommodate linkages with other marketplaces to attract further liquidity.
SET Connect, with faster-than-ever trading speed, can match buy and sell orders about 60 times faster than the previous trading system with market valuation up to 300 billion baht a day.
"The new trading system is more efficient and will help to upgrade the Thai capital market to international standards, protocols and other trading innovations," said SET president Charamporn Jotikasthira.
It will develop a market surveillance system that will comply with international standards. This system is able to instantly and proactively monitor and detect anomalies with high effectiveness, boosting reliability and minimising possible risks.
In addition to SET Connect, the Thai bourse will also start operating a new market data system, integrating directly with the new trading engine.
The new market data system will be more efficient in disseminating trading information to the member systems and information services providers with fairness and transparency.
"We believe the new system will boost the Thai capital market's competitiveness, which is a crucial step to providing trading services with cutting-edge technology, making it one of the world's most efficient trading engines," said Mr Charamporn.
With such outstanding features, SET Connect will enhance the confidence of global investors about the potential of Thai capital market, propelling the market onto the international stage and making the most of all opportunities for investors, as well as providing the right financial opportunities for market participants.
Mr Charamporn said SET Connect has been used by 32 active brokers and other market participants, and so far they have had no problems with the switch to the trading system.
The SET is now taking a lead in the region with its ambitious IT Master Plan, thanks to close cooperation with Cinnober Financial Technology AB, the leading trading system developer for the world's top stock exchanges.
"This is a major step forward, and we're looking forward to the full unveiling of functionality in phase two of the project, when derivatives will be traded on the same platform," said the SET president.
Mr Charamporn said the next step, after the trading system upgrade, is to invite HFT investors to take up more active roles in the Thai stock market. Until now, this group of investors have traded through foreign brokers.
The SET wants to increase HFT trading contribution, which stands at 6-7% at present. HFT accounts for up to 30% of the trade in some exchanges.
HFT is a trading platform that uses powerful computers to transact large numbers of orders at very fast speeds. The system uses complex algorithms to analyse multiple markets and execute orders based on market conditions.
Typically, traders with fast execution speeds will be more profitable than traders with slower executions speeds.
Investopedia said HFT will be more popular when exchanges begin offering incentives for companies to add liquidity to the market.
For instance, the New York Stock Exchange (NYSE) has a group of investors called Supplemental Liquidity Provider (SLP) to help boost liquidity for the market. The NYSE gives them some incentives such as fees or commission rebates.
As of 2009, the rebate to SLP was US$0.0015 per transaction. Multiplied by millions of transactions a day, this is where most of the profits for high-frequency trading come from.
The SLP was introduced following the collapse of Lehman Brothers in 2008, when liquidity was a major concern for investors.
Mr Charamporn said the SET was considering opening HFT next year, and the SET will allow HFT to install its computer trading machine close to or next to the SET trading system _ in the same room at SET headquarters _ to make its trading as fast as other exchanges.
HFT daily trade will also gradually increase to 20% from 6-7% now after the SET opens direct trading for this group of investors next year.
Foreign brokers are the clients targeted by HFT. However, HFT poses some risks, so the SET will limit its trading to 20%.
Pattera Dilokrungthirapop, chairwoman of the Association of Thai Securities Companies, said the new trading platform operates successfully as all brokers have been able trade via SET Connect smoothly and flexibly.
The new SET system can respond to trading orders much faster than the previous system and is able to cover the market and serve brokers' business expansions, she said, adding that SET Connect can also accommodate new financial products and multi-currency trading more flexibly.
Mrs Pattera said using the FIX protocol, it is able to connect with other stock exchanges more conveniently and efficiently.
Wanchai Panwichien, an investor who trades via the internet, said SET Connect is very helpful as it is much faster than the previous system.
"It's very useful, especially when I'm doing online trading. Even if I'm upcountry, the matching can go through in seconds. It's a good development for the Thai stock market," he said.
Mr Wanchai now holds shares in Chuo Senko (Thailand) (9.7%), Better World Green (3.77%) and BTS Group Holdings (0.59%).
The SET has come a long way from ‘the pit’ in the top undated file photo to app-driven mobile trading.
About the author
- Writer: Nuntawun Polkuamdee
Position: Business Reporter