Thai stock exchange to restrict short selling
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Thai stock exchange to restrict short selling

The Securities and Exchange Commission (SEC) is asking the Stock Exchange of Thailand (SET) to impose pricing rules for short selling while the SEC will examine the SET's naked short selling system soon, the regulator said on Monday.

Deputy secretary-general Jomkwan Kongsakul said the SEC has also tasked the bourse to inform brokers to identify the ultimate beneficiaries of short selling transactions, meaning that brokers would have to ask custodians to disclose the names of investors who borrow stocks from the custodian for the transaction.

The deputy head of the SEC also sought to reassure investors, saying the regulator is investigating naked short selling in the country's stock market by utilising the following procedures.

First, the stock exchange has been asked to reimpose the “uptick” rule, a regulation requiring any short sale to take place at a higher price than the stock's last trading price if that stock is down 10% or more from the last trading day's closing price.

The SET implemented a temporary uptick rule in March 2020, originally until June 2020, and later extended it to Sept 30 of the same year.

The SET reverted to zero uptick short-selling rules in October 2020.

If the existing measures are insufficient, the SET would be able to review the measures and propose them to the SEC for its approval, Ms Jomkwan said.

“The SET's operations have been inspected continuously, including the monitoring of short selling transactions that do not involve naked short selling, which is currently a concern for investors,” she said.

Ms Jomkwan explained that the SEC found the SET's inspection system was carried out on a risk-based basis and stepped up the investigations when the risk were higher.

The Thai bourse can order a punishment if it finds any practices that do not fall in line with the procedures. 

“If any short selling transactions have an impact on the price, causing it to deviate from normal market conditions, whether it is a foreign or domestic transaction, the SEC is able to enforce the law to bring the perpetrators, including securities companies who participated or colluded in the wrongdoing, to book.”

The SEC has also set criteria and inspected the operations of securities firms by asking them to send trading orders for short selling transactions.

This is to ensure that the customers have securities or have borrowed securities before sending sales orders and meet the relevant criteria, she said.

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