"Basket-order trading and VWAP will assist brokers in handling customers' stock orders, and they are also tools to be used for risk management. In addition, the implementation of the system will help upgrade the Thai stock market to international standards," SET executive vice president Suthichai Chitvanich told reporters at a briefing yesterday.

Basket-order trading allows stock investors to select a group of stocks and order them in batches instead of making separate orders.

He said securities to be traded in basket orders must be in the SET50 Index. The number of stocks in each basket order must exceed 10, with a value not lower than Bt15 million.

To prevent basket-order trading from skewing the overall stock market, prices of each stock in a basket must be in a range of plus or minus 2 per cent of the current share price, he said. Suthichai said this trading method could also be a vehicle for derivative investments and index-arbitrage activities.

It will make portfolio management more efficient, especially for investment firms with index-linked funds under management, he said, adding that allowing basket orders will therefore benefit investors and put the Thai market more in line with overseas exchanges.

Presently, basket orders are only being used in large bourses, including Hong Kong, New York and Singapore.

 The SET earlier said that basket orders could be made during normal trading hours and each basket must be made up of only buy or sell orders. Each order included in the basket will be queued and matched in the SET's trading system by time and price priority, similar to the trading process for normal orders.

Regarding VWAP, this is a computer program that allows investors to buy a stock at the average price during a given trading day.

"Allowing brokers to use VWAP to place orders will make brokerages more efficient by fixing the order price at the average price for each particular stock," said Suthichai.

The stock exchange has also revised regulations governing order matching both at the opening and at the close of a trading session by offering shares during the period to investors who do not specify a buy or sell price on their order. This amendment is also effective from July 3.

Under current rules, orders executed during either period must be those placed by investors who have set a specific price.

Siriporn Chanjindamanee

 The Nation