The Stock Exchange of Thailand has no policy to increase the number of SET members for securities trading, but the notion will be deliberated when the market environment is more suitable, SET president Pakorn Peetathawatchai said.
The Securities and Exchange Act of 2019, effective since April, stipulates that the SET's board of directors may allow persons other than securities companies that are members of the SET to purchase or sell a particular type of listed security on the SET.
No member of the SET shall purchase or sell listed securities outside the SET, unless permission from the SET is obtained or the purchase or sale is made in compliance with rules, conditions and procedures specified by the type of securities licence granted, according to the act.
Although the SET can allow new member brokers, such as foreign securities firms equipped with high-speed trading platforms, the bourse has to assess timing and other relevant factors before making such a move, Mr Pakorn said.
"Non-member brokers still have to send their trading orders through existing SET member brokers," he said. "While trading orders have been made through Direct Market Access (DMA), trading volume will have to go through the SET's member brokers, who will have a responsibility to manage risk and oversee trading transactions."
At present, DMA is the trading method that member companies use to let eligible investors enter trading orders via the electronic order management system. The orders are then sent to the brokers' trading system.
Securities trading transactions via DMA continue to increase, especially for algorithmic trading or robo-trading programmes incorporating electronic trading tools characterised by high speed, high turnover rates and high order-to-trade ratios.
The SET recognises that some algorithmic trading programmes could cause higher volatility in equity trading. The bourse is studying and conducting a public hearing on assessing the overall impact of algorithmic trading programmes and parties benefiting from this trading method.
"We will have to see the result of the public hearing," Mr Pakorn said. "Algorithmic trading could yield benefits to the overall stock market and investors, but this can have an impact on traditional trading platforms and securities firms that have not made a lot of investment in new technological trading tools."
The SET will also require member brokers to identify clients and trading programmes that are responsible for creating abnormal movements in share prices, he said.
Regarding the bourse's plan to become a digital asset exchange in the future, he said the SET has been studying this business model and is still assessing the legal and IT system frameworks.
Bualuang Securities (BLS) managing director Bannarong Pichyakorn said high-speed trading programmes have been active, especially for derivative warrant (DW) trading, because DWs give a leverage of 3-20 times to investors because the price or premium of DWs is significantly lower when compared with their underlying prices.
DW is a short-term investment product popular among day-trading and speculative investors. There has been a rise in foreign trading orders, which subsequently affects individual investors significantly because of the advantage of high-speed matching orders.
Mr Bannarong said several DW issuers, including BLS, have met with the SET to ask for an investigation into high-speed trading programmes used by some member brokers that have raised stock market volatility and reduced the ratio for individual investors.