Securities Regulation and Corporate Governance

To bring transparency, fairness and compliance in line with international standards, the Thai government is participating in a joint IMF and World Bank project - Report on the Observance of Standards and Codes (ROSCs). Thailand will be initially assessed in the areas of corporate governance and securities regulation. The ROSC assessment details the current state of affairs in these areas and provides policy recommendations.

Shorter Settlement Cycle

The Thailand Securities Depository (TSD) is studying the possibility of moving toward a T+1 settlement cycle to reduce risks associated with a longer clearing and settlement period. Most corporate bonds are currently cleared and settled at the TSD, a subsidiary of the Stock Exchange of Thailand (SET). Clearing and settlement of bonds traded through the newly established Bond Electronic Exchange (BEX), for instance, is done by the TSD. At present, the settlement convention is T+2.

New Futures Exchange

In February 2005, the Thailand Futures Exchange (TFEX) has been granted approval from the Securities and Exchange Commission to operate a futures exchange. A derivatives clearinghouse licensed was also given to the Thailand Clearing House Co., Ltd. (TCH). Products to be traded will include both debt and equity derivatives. The TFEX is a wholly-owned subsidiary of the Stock Exchange of Thailand (SET).

The establishment of the exchange was facilitated by the passage of the
Derivatives Market Act, which took effect in January 2004. The Act specifies legal provisions regarding supervision, regulation and conduct of derivative markets, as well as guidelines on the formation and operation of an exchange and clearinghouse. Several preparations are currently being taken to ensure a productive launch in 2006. These includes rules and regulation approvals which are related to TFEX and the TCH, final reviews for operational systems of derivatives agent licenses, test runs of front and back office systems, and training programs for the derivative industry participants.

Developing Hedging Instruments

Parallel to plans for a derivatives exchange, the SEC is also planning to expand the range of hedging instruments available to the market. The SEC intends to set procedures for securities lending and borrowing, develop standardized legal contracts for these instruments, as well as ease restrictions on short selling of debt and equity securities.

Foreign Institutions Baht Bond Issuance

The Ministry of Finance (MoF) has eased regulations on the issuance of THB-denominated debt instruments for certain offshore issuers effective January 2004. Through this rule, several international institutions can issue THB-denominated bonds. The regulation will still require proceeds of the issue to be used for projects within the country or in neighboring countries, or for the proceeds to be swapped into a foreign currency. In May 2005, the Asian Development Bank (ADB) issued THB 4 billion five-year bonds, the first local currency bond issued by a foreign institution in Thailand.

Asian Bond Market Development Secretariat

Thailand plans to set up an independent Secretariat devoted entirely to the Asian bond market. This plan was initiated by the MoF and approved in January 2004 by the Cabinet. The Secretariat aims to become a center for monitoring and coordinating debt market development in Asia. It also aims to become an important research and information center to create better understanding about the region's capital markets.