TBMA joins fintech push

TBMA joins fintech push

The Thai Bond Market Association (TBMA) will incorporate financial technology (fintech) through the registrar service platform using blockchain technology this year, aiming to facilitate and promote growth of the secondary market's liquidity.

TBMA president Tada Phutthitada said the registrar service platform is scheduled to apply to the regulatory sandbox by year-end and will become the first fintech platform applying to both regulatory sandboxes at the Securities and Exchange Commission (SEC) and the Bank of Thailand.

In the first phase, the registrar service platform will shorten the time required to issue bond certificates to 3-4 days from 7-15 days at present, Mr Tada said.

The TBMA set a milestone that bond issuance will be able to conclude within two days through the scripless system in the future.

Scripless is defined as securities trading in which only book entries represent the security holding and settlement, and no physical certificate is issued or exchanged.

"The faster bond certificate issuance allows bondholders to trade in the secondary market faster and reduces settlement risk for bond investors," Mr Tada said.

Average trading value of corporate bonds in the secondary bond market has been accelerating over the past six years, logging 5.09 billion baht in 2017, up from 4.33 billion in 2016 and 800 million in 2011.

For the first six months of 2018, average trading value of corporate bonds was 5.23 billion baht, up 2.8% year-on-year.

Market liquidity has been growing rapidly, but issuance of bond certificates remains slow. If nothing is done to speed up bond certificate issuance, the growth of corporate bonds in the secondary market could be limited, Mr Tada said.

"We are trying to accommodate the market to grow without risks that may cause limitations," he said.

Growth in the primary bond market, scaling record highs in the last few years, has in turn driven growth in the secondary bond market.

Services on the bond registrar platform include bond settlement information system, a bond subscription system and a verification system for bond transactions, Mr Tada said.

The platform, to be developed on a smart contract platform, will employ private blockchain, allowing only registered members like issuers, regulators, registered companies and investors to use it.

The platform will also contain a bond fact sheet for information such as interest rates, interest payments and other conditions.

The second development phase involves servicing bond deposits, which will take nine months for programme development.

The third phase will include Bond Coin, a clearing and settlement system that will be developed in the next 12 months.

Executive vice-president Chaitat Prachuabdee said the TBMA is also studying a "utility settlement coin" to support the scripless system.

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