Significant changes could occur in the global capital markets as EU financial regulators implement the Markets in Financial Instruments Directive II (MIFID II) early next year, says the Stock Exchange of Thailand (SET).
Santi: Customers will question fees
The new EU regulation could cause a spillover effect to other capital markets because Thailand's capital market comprises both Thai and non-Thai brokers and fund managers, said SET senior executive vice-president Santi Kiranand.
When securities companies in Thailand conduct businesses with European fund managers, they are required to set unbundling fees in accordance with MIFID II to serve European customers.
Mr Santi recalled how the SET used to set unbundling fees apart, which separated the advisory price from the trading fee, nearly 10 years ago.
At that time, the unbundling fees affected trading volume in the capital market and securities companies had to make a year-long effort to create a mutual understanding with their customers, he said.
"The effect of unbundling fees on trading volume may not have been clear at that time. But now market capitalisation has grown manifold since a decade ago and a small effect [caused by the unbundling fees] would be clearly visible," said Mr Santi.
He said the MIFID II may also induce changes in the financial landscape of global capital markets as the adoption of new unbundling fees will make investors adopt a stricter approach on trading expenses.
"Whenever the fees of each trading account are shown, investors always question why they have to pay such fees on different accounts," said Mr Santi.
The MIFID II is EU legislation by the European Securities and Markets Authority that regulates firms providing financial services to clients linked to financial instruments and venues where those instruments are traded.
The rule will only apply to EU countries starting from the beginning of 2018, intending to offer more protection for investors and enhancing greater transparency in all asset classes.
Markets outside the EU have not adopted this regulation. However, securities companies that are doing business with European fund managers are required to set unbundling fees in accordance with MIFID II to serve European customers.
Separately, the SET yesterday hosted an event titled "SET in the City", considered the largest investment event in Thailand this year.
SET president Kesara Manchusree said the bourse set a target of 120,000 visitors this year, with new investors expected to make up around 50% of visitors.
"Younger generations have greater awareness of financial planning. More than 100,000 new investors have entered the capital market, with around 10,000 of them entering the Thailand Futures Exchange," said Mrs Kesara.
Thailand has some 2.1 million securities trading accounts owned by about 1 million people.