The Stock Exchange of Thailand (SET) is planning to raise the market capitalisation requirement for securities eligible for short selling and triple the fines for violators of short selling rules.
In a statement issued on Thursday, the SET said it would raise the bar on short selling and program trading supervision based on its study of measures used by leading international bourses.
The steps are meant to improve the effectiveness of market supervision and strengthen investor confidence, noted the statement.
The updated regulations are subject to a public hearing, as they raise the market capitalisation requirement for securities eligible for short selling from the current level of 5 billion baht to 7.5 billion.
Another new rule concerns stock liquidity, requiring companies to have monthly trading volume of more than 2% of monthly turnover in those securities.
According to the statement, additional criteria would be launched to minimise the impacts of short selling.
For example, if the price of a stock drops by more than 10% from the previous day's close, the short sale price must be higher than the latest price under the uptick rule. The uptick rule is a financial regulation requiring short sales to be conducted at a higher price than the previous trade.
In addition, the SET plans to set a ceiling for the short selling of securities in the form of a daily limit, while increasing the daily disclosure of accumulated short selling volume that has not yet been repurchased (outstanding) for each security to provide more information to investors.
"If there are violations of the short selling rules, the fines imposed on violators will be three times higher, in line with the guidelines of leading stock exchanges abroad," the statement noted, adding related laws would be amended to allow regulators to punish rulebreakers directly.
Measures are also scheduled to ensure orderly program trading on the SET, preventing abnormal price fluctuations, said the bourse.
"An intra-day ceiling for price movements [dynamic price band] will be set to narrow the movement between the ceiling and floor prices that is currently in use," said the SET.
"If the price reaches that price level, trading will be temporarily suspended before it is restored."
The SET also wants to increase its monitoring of trading orders that affect the market, both in terms of quantity and price, by creating a central screening system to prevent orders from being placed too frequently.
An "auto-halt" would be triggered for individual securities if they are bought or sold at a quantity exceeding the level specified, said the bourse.
Investors wanting to do high-frequency trading must first register so the SET can monitor them, according to the statement.
The names of investors verified as being involved in inappropriate trading behaviour will be disclosed to all member companies for them to consider when taking action, such as reducing the investor's credit limit or requiring trading through an investment advisor.