Stock Exchange of Thailand

The Stock Exchange of Thailand (SET, Thai: ตลาดหลักทรัพย์แห่งประเทศไทย) is the only stock exchange in Thailand. SET is ASEAN’s second largest stock exchange by market capitalization at USD 473 billion as of June, 2020 but it is crowned as the biggest IPO market in the region with accumulated fund amounting to USD 17.8 billion raised during 2015 to June 2020. SET is also ASEAN’s most active bourse with the average daily trading turnover of USD 2.16 billion as of June 2020. [2] At the end-2019, there were 556 companies listed on SET, 169 on Market for Alternative Investment (mai) and 228 bonds on Thailand Bond Exchange (TBX). Other types of securities including warrant, derivative warrant (DW), depositary receipt (DR), exchange-traded fund (ETF), real estate investment trust (REIT) and infrastructure fund are also listed on SET. SET President Pakorn Peetathawatchai has taken the helm since June 1,2018.

The Stock Exchange of Thailand
SET
TypeStock exchange
LocationDindaeng, Bangkok, Thailand
Founded30 April 1975 (1975-04-30)
CurrencyThai baht
Market cap16.75 trillion baht at the end of 2019. [1] ($531.75 billion)
Websitewww.set.or.th

Vision

SET is aimed to make the capital market as a driving force for the Thai economic growth and to be beneficial to all stakeholders. The objectives are integrated into SET’s vision “To Make the Capital Market ‘Work’ for Everyone”.

History

The modern Thai capital market traces its origins back to the early 1960s. In 1961, Thailand implemented its first five-year National Economic and Social Development Plan to promote economic growth and stability as well as develop people’s standard of living. Subsequently, the Second National Economic and Social Development Plan (1967–1971) initiated an establishment of Thailand’s first securities market to play the vital role of mobilizing capital to support the nation’s economic and industrial development.

The modern era of the Thai capital market can be divided into two phases, starting from the privately-owned Bangkok Stock Exchange (BSE) to SET.


The Bangkok Stock Exchange

The first Thai stock exchange was established in July 1962 in the form of a limited partnership. In 1963, the stock exchange was registered as a limited company and its name was changed to the Bangkok Stock Exchange Co., Ltd. (BSE).

Although BSE provided a good venue for trading shares, it garnered limited attention. Annual turnover was a mere THB 160 million in 1968 and THB 114 million in 1969. Trading volume continued to drop sharply to THB 46 million in 1970, and then fell further to THB 28 million in 1971. While the turnover in debentures reached THB 87 million in 1972, stock trading continued to perform poorly, with turnover hitting an all-time low of a meagre THB 26 million. BSE finally ceased operations in the early 1970s.

BSE’s failure could be attributed to a lack of government supports and Thais’ limited understanding of equity market at that time.

The Stock Exchange of Thailand

Despite BSE’s fiasco, the concept regarding the establishment of a well-regulated stock market that had government support received widespread interest from the public. The Second National Economic and Social Development Plan (1967–1971) therefore proposed the establishment of a capital market for the first time to provide the appropriate measures and tools to facilitate securities trading.

In 1969, as recommended by the World Bank, the government appointed Professor Sidney M. Robbins from Columbia University to study the development of the Thai capital market. Professor Robbins had previously served as Chief Economist at the United States Securities and Exchange Commission. The same year proved an eventful one for the Thai capital market, as the Bank of Thailand also formed a working group on capital market development, tasked with establishing the stock market. A year later, in 1970, Professor Robbins produced a comprehensive report entitled "A Capital Market in Thailand." This report became the master plan for the future development of the Thai capital market.

In 1972, the Thai government took a further step in creating a capital market by amending the "Announcement of the Executive Council No. 58 on the Control of Commercial Undertakings Affecting Public Safety and Welfare." The changes extended government control and regulation over the operations of finance and securities companies, which until then had operated fairly freely. Then in May 1974, long-awaited legislation for the incorporation of SET was enacted to provide securities trading in order to promote savings and mobilize domestic capital. This was followed by revisions to the Revenue Code at the end of the year, allowing the investment of savings in the capital market. By 1975 the basic legislative framework was in place and on April 30, 1975, the Securities Exchange of Thailand officially started trading. On January 1, 1991 the name was formally changed to the Stock Exchange of Thailand (SET). [3]


Roles

Roles of the Stock Exchange of Thailand

As defined in the Securities and Exchange Act of 1992, the SET's primary roles are:

1. To serve as the center for the trading of listed securities, and to provide systems needed to facilitate securities trading. 2. To conduct any business relating to securities trading, such as clearing house, securities depository, securities registrar, and similar activities. 3. To undertake any other business approved by the SEC.

Operations

SET is a juristic entity set up under the Securities Exchange of Thailand Act, B.E. 2517 (1974), while operating under the legal framework laid down in the Securities and Exchange Act, B.E. 2535 (1992). SET’s key operations include securities listing, trading, clearing and settlement, depository, securities trading and information disclosure supervision, market participant protection and information dissemination. SET has actively engaged its stakeholders in promoting sustainability management in the Thai capital market ecosystem to benefit market participants and the general public. As the center of securities trading, SET has been promoting long-term fund-raising among businesses to ensure corporate competitive advantage and benefit the Thai economic growth. In addition, SET has continued to develop financial literacy to enhance well-being of people in society.

Business

SET provides end-to-end exchange services as follows: • Securities market Listing and trading: SET Group provides securities trading service through SET and mai, while offering bond trading service through TBX. Clearing and settlement: SET Group is a clearing house for transactions executed on SET, mai and TBAX. The group also offers the clearing and settlement services for over-the-counter (OTC) bond trading. Depository: SET Group serves as a central securities depository for stocks and bonds, using a secure and efficient scripless system. Market supervision: SET Group supervises trading activities of all investors and brokerage houses to ensure that the market is reliable, transparent and efficient. • Derivatives market SET Group operates a derivatives market through Thailand Futures Exchange (TFEX) and supervises trading activities of investors and all derivatives market members. • Technology services and capital market infrastructures SET Group offers both front and back office services including front-offer service bureau system, internet trading system, and back-office service bureau system. The group also provides market data services that develop and disseminate stock indices, trading market data and listed companies’ information for data vendors and investors, and the FundConnext – a centralized mutual fund platform to connect among asset management companies and selling agents. Moreover, SET Group operates payment system infrastructure called FinNet, which centralizes payment process and sets connecting standards between intermediaries in the capital market and commercial banks. • Registrar services SET Group acts as a registrar for equity products and maintain the registrar book that contains accurate and complete shareholder information including their benefits, and connect registrar services with a direct linkage to the Securities Depository Center.


Trading

Trading system

The SET has operated fully computerized trading since April 1991 through the Automated System for the Stock Exchange of Thailand (ASSET), which enables trading to be efficient, equitable, and fluid. In this trading system, two principal methods of trading are available: Automatic Order Matching (AOM) and Put-Through transactions (PT). In 2012, The SET successfully launched its new trading platform, SET CONNECT. SET CONNECT offers greater capacity and superior transaction speed, and provides the uses of industry standard interfaces, making it easier to accommodate linkage with other marketplaces to attract further liquidity.

Automatic order matching (AOM)

AOM trading performs the order matching process without human intervention. After brokerage houses electronically send buy or sell orders from their offices to the SET mainframe computer, the ASSET system queues the orders and arranges them according to a price-then-time priority. This means orders are first grouped according to price, with the best price taking precedence. Then, within each price group, orders are arranged according to time. In terms of the matching process, there are two methods: continuous order matching and call market method. Continuous Order Matching procedures operate during the regular trading sessions. The ASSET continuously matches the first buy and sell orders in the queue, and at the same time, confirms each executed transaction via the member (broker's) terminal. Call market matching is used in calculating the opening and closing prices of a security at the opening and closing of trading. This method allows brokers to enter their orders to be queued for matching at a specified time at a single price that generates the greatest trading volumes for that particular stock.

Put Through (PT) trading

ASSET also allows brokers to advertise their buy or sell interests by announcing bid or offer prices. Members may then deal directly with each other, either on behalf of their clients or for themselves. Prices may be adjusted during the negotiation; hence, the effective executed price may not be the same as that advertised and may not follow the price spread rules. After concluding negotiations, dealers must send details of the results to ASSET for recording purposes.:[4]

Trading hours

SET trading is conducted on all bank business days, normally Monday through Friday. There are two trading sessions per day, morning and afternoon except Cross-border Products.

  • Pre-opening session I: This is the morning auction which starts at 09:30 and ends at a random time between 09:55 and 10:00 when the open price is determined.
  • Morning Session: This session starts immediately after the pre-open (at a random time between 09:55 and 10:00) and continues till 12:30.
  • Pre-opening session II: This is the afternoon auction which starts at 14:00 and ends at a random time between 14:25 and 14:30 when the afternoon open price is determined.
  • Afternoon Session: This session starts immediately after the pre-open II (at a random time between 14:25 and 14:30) and continues till 16:30.
  • Closing session: The close auction starts at 16:30 and ends at a random time between 16:35 and 16.40.

Price regulations

Floor and ceiling limits

Effective from March 18, 2020, SET temporarily revises its ceiling & floor limits to +/- 15% from +/- 30% of the previous closing price for stocks, investment units, warrant, DW, ETF, transferable subscription right and DR; and +/-30% from +/-60% for foreign shares traded on SET and Market for Alternative Investment (mai) to stabilize stock market amid the global wild swings over the Covid-19 pandemic,

Circuit breaker

Apart from the temporary adoption of the ceiling & floor price limits, SET has permanently tweaked circuit breaker criteria to three from two trigger levels. According to the current criteria, a 30-minute circuit breaker is kicked in for an 8% fall from the previous close, trading halt for another 30 minutes is triggered for a 15% slump, and a one-hour halt in trading for a 20% dip, Stock trading is no longer halted after the level-three circuit breaker is triggered.

Industry group indices and sectoral indices

SET has 8 industry groups and 28 sectors.

  • Agro and food industry (agribusiness, food, and beverage)
  • Consumer products (fashion, home and office products, and personal products and pharmaceuticals)
  • Financials (banking, finance and securities, and insurance)
  • Industrials (automotive, industrial materials and machinery, packaging, paper and printing materials, petrochemicals and chemicals, and steel)
  • Property and construction (construction materials, construction services, property development, and property fund and REITs)
  • Resources (energy and utilities, and mining)
  • Services (commerce, health care services, media and publishing, professional services, tourism and leisure, and transportation and logistics)
  • Technology (electronic components, and information and communication technology)
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References
  1. Stock Exchange of Thailand Annual Report 2019, page 27
  2. , SET Focus July 2020
  3. "History & Roles". Stock Exchange of Thailand (SET). Retrieved 24 July 2020.
  4. "The Stock Exchange of Thailand - Supervision of Market - Trading system and procedure". The Stock Exchange of Thailand. Retrieved 1 July 2011.
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