The Stock Exchange of Thailand (SET) is preparing a major overhaul of its market supervision framework, with proposed changes to short-selling rules and high-frequency trading (HFT) regulations set to take effect in the third quarter.
SET president Asadej Kongsiri said the proposed adjustments and removal of several outdated trading rules were aimed at curbing inappropriate trading behaviour, while ensuring equal access to market information and trading opportunities for all participants.
"This roadmap will help create a more balanced trading environment and provide more concrete mechanisms to manage market volatility," he said.
One of the main proposals narrows the tick size for stocks priced between 5-50 baht per share. The SET believes smaller price increments will reduce bid-ask spreads, improve order matching efficiency, lower transaction costs for investors, and enhance market liquidity.
The exchange plans to impose an "extra charge" on accounts with excessively high order-to-trade ratios (OTR) -- a practice often associated with algorithmic or HFT strategies that generate large volumes of orders with minimal execution.
Under the proposal, accounts with an OTR exceeding 100 times and more than 50 orders per active minute would face an additional fee of 0.15 baht per order for transactions exceeding 30,000 orders per day.
To address abnormal market volatility, the bourse is updating an uptick rule. Under the new proposal, if a stock falls by 10% or more from the previous day's closing price, short selling of that specific security would only be allowed at a price higher than the last traded price for the remainder of the trading session. During normal market conditions, the SET will continue to apply the less restrictive "zero-plus tick" rule.
The exchange also intends to limit short-selling activities exclusively to highly liquid securities, including constituents of the SET100 Index, exchange-traded funds (ETFs), depositary receipts, and securities underlying Single Stock Futures contracts.
Short selling would be prohibited in securities underlying ETFs and derivative warrants, aiming to reduce speculative pressure in less liquid segments of the market.
The bourse also plans to remove the dynamic price band mechanism for individual securities, aiming to eliminate unnecessary trading obstacles, particularly for low-liquidity stocks.
Rongrak Phanapavudhikul, senior executive vice-president of the SET, said the new system will classify HFT activity based on actual trading behaviour, such as order frequency, trading velocity, outstanding positions and daily trading value.
HFT investors would no longer be restricted to trading SET100 stocks, and HFT investors engaging in short-selling activities must fully comply with all short-selling regulations and liquidity requirements.
The less-effective minimum resting time rule would be abolished, replaced by artificial intelligence-driven surveillance systems capable of detecting abnormal trading patterns in real time.
Public hearings on the proposed measures are scheduled for May 13-29 before the proposals are submitted to the Securities and Exchange Commission for final approval.
