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Published on August 4, 2007

The Securities and Exchange Commission (SEC) has asked the Association of Securities Companies to look into increasing the collateral level for net settlement trading.

The current collateral level of 10 per cent is not enough to cover risk in the broker settlement system, and in the international market it is set at 20-25 per cent, said SEC secretary-general Thirachai Phuvanatnaranubala.

"The SEC has asked the association to propose that the Stock Exchange of Thailand (SET) raise the minimum collateral, to strengthen the system. It should be done in steps. For example, the value would be increased from 10 per cent to 12.5 per cent and then to 15 per cent. If the collateral level is raised, relevant agencies should alert retail investors in advance, in order to give them time to prepare," he said.

The SEC is revising regulations governing the securities-brokerage industry, so as to facilitate the upcoming full deregulation of the sector.

The soon-to-be relaxed regulations include permission for qualified brokers to open branches abroad, but such approval will be on a case-by-case basis, he said.

They will allow one manager to take charge of more than one branch if that broker has a strong financial position and sound surveillance system, Thirachai said.

In addition, the introduction of new financial products, including SET 50 Index options and derivative warrants, is part of preparations for the liberalisation.

"The key point is that the Bank of Thailand is allowing Thais to invest abroad. I would like to encourage local brokers to exploit this opportunity by studying financial products abroad and seeking alliances," he said.

From 2010, the SET will allow brokers to set their own brokerage fees, without a minimum requirement. Moreover, the securities watchdog is revising regulations to allow financial institutions to act as a brokerage.

The SEC is also ready to support revisions to remove any obstacles to brokers improving their services to beef up competitiveness, Thirachai said.

Meanwhile, from next January 1, the SEC will start naming brokerages whose marketing officers breach the law.

The securities watchdog will also require independent directors of all brokerages to undergo a course at the Institute of Directors next year to learn about directors' duties and responsibilities.

To balance between top management and auditing powers, the SEC will request that the board chairman be someone other than a top-level executive, he said.

Association of Securities Companies president Kampanart Lohacharoenvanich said his organisation was willing to work with the SEC towards good governance in the capital market.

The association will hold detailed discussions with the SEC to revise regulations that are stumbling blocks to the development of the securities business, he said.

Siriporn Chanjindamanee

The Nation