SET strengthening the supervision of short-selling and the use of algorithmic trading together with increasing the disclosure to the public
Bangkok – The Board of Governors (BoG) of the Stock Exchange of Thailand (SET) has approved in principle various measures to strengthen the supervision of short-selling and the use of algorithmic trading, as well as to increase the disclosure of information to the public. Those measures can be summarized as follows.
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Measures relating to short selling:
Revising the eligible securities allowed for short-selling. For any securities other than the securities within SET 100 and their relevant underlying securities, they will be eligible for short selling only if the market size of such security is not less than Baht 7,500 million (increasing from Baht 5,000 million), and such security has a monthly turnover at least 2%. This is to ensure the suitability of eligible securities allowed for short selling in terms of both size and liquidity.
Imposing uptick rule when the closing price of any securities has dropped over 10 percent from its closing price in the previous day. This is to decelerate the downward momentum of a securities price already in sharp decline.
Imposing a daily short-selling limit on each eligible security and disclosing the daily short-selling outstanding of each eligible security to the public.
Increasing fines in case of breaching the short-selling regulations. The fines to be imposed on securities companies in such case will be increased approximately three times. In addition, SET is working with the regulatory agencies to amend the legislation to directly impose penalties on investors who commit wrongdoings in this regard.
Developing a central system to serve as a source of information for securities companies and the exchange for pre-trade risk checks on clients’ stock balances. This is aimed at supervising the short-selling activities more efficiently.
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Measures to control the price fluctuation of any particular securities, improper trading behaviors, and the use of algorithmic trading
Imposing dynamic price band on each security in addition to the existing static +/- 30% daily movement limit to curb the extreme price fluctuation of such security.
For securities that are under the market surveillance measures list, should there be extreme price volatilities, the exchange may require that the trading of such securities must be executed through an auction procedure instead of automatic order matching.
Revising the improper trading behaviors guideline to include additional behaviors or patterns affecting the market in quantity and price. The exchange also plans to develop a central order screening system to prevent improper trading orders (such as spoofing), as well as to impose a minimum resting time for incoming orders before they can be canceled.
Imposing an automatic trading halt on any particular securities, should the amount of the aggregated purchasing and selling orders for such securities exceed the specified threshold (relative to the number of the total listed shares of such securities). This is to prevent the potential unusual trading.
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Measures regarding reporting and disclosure
Disclosure of names of investors having inappropriate trading behaviors to all securities companies. This will serve as information for securities companies to take proper actions against the investors trading with improper behaviors according to the existing guidelines, such as reducing the credit limit of such investors, etc.
Disclosure of the names of NVDR holders. Thai NVDR Co., Ltd. (as the issuer of NVDRs) will be required to disclose the names of NVDR holders of at least 0.5% but not less than 10 persons, similar to the disclosure of the names of shareholders of listed companies. This is aimed to provide more information to investors for making investment decisions.
Next step, SET will consult with the stakeholders on the proposed amendments to the rules and regulations to reflect the above measures, and proceed with public hearings. After that, SET will propose the revised rules and regulations to the SEC for approval.