The Securities and Exchange Commission (SEC) is seeking public comments on proposed principles and draft amendments to the regulations related to provision of securities trading services and the sale of securities where the securities company does not possess the securities. The proposed amendments aim to enhance the oversight of securities trading services, maintain fair practices and clarify service provision of securities companies.

Currently, a significant volume of securities trading on the Stock Exchange of Thailand (SET) involves foreign investors, with most orders executed through foreign securities companies to Thai securities companies. In receiving these orders, Thai securities companies may not have complete information on the clients of the foreign securities companies and their trading behaviors. Therefore, it is essential to establish regulations ensuring that Thai securities companies, under the supervision of the SEC, implement stringent processes and systems for screening and monitoring. This will ensure that foreign securities companies, as clients of Thai securities companies, comply appropriately with the regulations related to short selling and long selling transactions*.

The Capital Market Supervisory Board has approved in principle the proposed amendments to the regulations related to the provision of securities trading services and the sale of securities where the securities company does not have the securities in its possession. The SEC is therefore conducting this public hearing to gather feedback from stakeholders. The key points of the proposed amendments are as follows:   

    (1) To require securities companies with clients who are securities companies under foreign law and acting as brokers or agents in trading or exchange of securities for others (inter-brokers) to additionally conduct a Know-Your-Process (KYP) due diligence. This is to ensure that clients who are foreign securities companies acknowledge and understand the relevant regulations and effectively communicate these regulations to their own clients. It also aims to ensure that the clients have work systems in place to control and monitor compliance with the relevant regulations;      

    (2) To require that securities companies put in place efficient work systems for monitoring and inspecting securities trading transactions of clients; 

    (3) To require that securities companies enter into an agreement with their clients before commencing service provision, ensuring that the clients agree to pay a fine if the securities companies are penalized by the SET or the clearing house due to the clients' failure to comply with regulations related to short selling transactions. The securities companies would also have the duty to ensure compliance with the agreement;     

    (4) To require that securities companies put in place a system for receiving, sending and transmitting client orders into the SET's system in accordance with the criteria set by the SET, and establish an efficient order transmission system capable of distinguishing short selling transactions from long selling transactions; 

    (5) To require that securities companies examine clients’ securities trading orders to verify that the clients fully borrow or own securities before executing the trading orders; and

    (6) To require that securities companies establish a work system for post-trade monitoring and examining clients’ executed trading transactions through random inspections of potentially inappropriate short selling and long selling transactions. 

The consultation paper is available at: 

https://www.sec.or.th/TH/Pages/PB_Detail.aspx?SECID=1018 and the legal hub at https://law.go.th/listeningDetail?survey_id=NDM5NERHQV9MQVdfRlJPTlRFTkQ=. Stakeholders and Interested parties are welcome to submit comments and suggestions via the SEC website or email: gritchanut@sec.or.th, phachisa@sec.or.th or anudporn@sec.or.th. The public hearing ends on 31 October 2024. 

Remarks:  

* Short selling transaction refers to the sale of securities that are borrowed for delivery, either in the name of the securities company or according to the client's order, in accordance with the specified criteria.