The Stock Exchange of Thailand (SET) is preparing to upgrade measures to control stock price fluctuations from automatic order matching (AOM), with the change expected to be enforced by the third quarter, says the bourse.
The statement was issued as the SET announced a warning to investors urging caution before deciding to buy or sell Miss Grand international (MGI) shares as the price continued to increase, even though fundamental factors remained unchanged.
SET president Pakorn Peetathawatchai said auction trading would be used instead of AOM to improve the supervision of stocks with highly volatile prices.
The measure is subject to a public hearing and must be approved by the Securities and Exchange Commission before taking effect, which is expected by the third quarter of this year.
An auction market is a market where the price is determined by the highest price the buyer is willing to pay (bid), and the lowest price the seller is willing to take (offer).
Trades on the exchange will be executed when an offer and bid match, said the SET.
The New York Stock Exchange is an example of an auction market.
Other important measures the SET expects to implement include raising the market capitalisation for stocks eligible for short selling from 5 billion baht to 7.5 billion. In addition, monthly trading value must exceed 2% of the stock's monthly turnover.
If a stock falls more than 10% from the previous day's close, the short selling price must be higher than the latest price under the uptick rule.
In addition, the SET will set a daily ceiling for short selling and increase the daily disclosure of accumulated short-selling volume that has not been repurchased (outstanding) for each stock.
The bourse also wants to improve the disclosure criteria to the public, such as disclosing inappropriate trading behaviour to all member companies and disclosing the names of non-voting depository receipt shareholders with at least 0.5% shares and not less than 10 people.
Fines are expected to triple for those found to have committed naked short selling, according to SET criteria.
The new rules call for a fine of three times the profit received, with a minimum of 1 million baht.
The fine for not reporting to the bourse according to its criteria is set to increase to 150,000 baht, up from 50,000 baht.
In related news, MGI was suspended from trading last Friday because of changes in trading conditions that did not match fundamental factors. Trading resumed yesterday, with the price hitting a ceiling of 65 baht, up 1,200% since the initial public offering.
"SET investors are advised to study information on MGI, especially factual information and background material, before purchasing the stock because the price-earnings (P/E) and price-to-book value (P/BV) ratios are 88.1 and 23.1, respectively," said the bourse in a statement.