The Thailand Futures Exchange (TFEX), under the Stock Exchange of Thailand (SET) group, will modify its SET50 futures contract to have a smaller contract size on May 6, 2014. The new size of the SET50 futures will increase the product liquidity and reduce
TFEX is continually improving its products to better serve investor needs, TFEX managing director Kesara Manchusree said.
After TFEX started trading SET50 futures in April 2006, the SET50 Index was at its lowest at around 300 points. The index has dramatically increased over time, reaching its highest point last year at 1,092.27, so the SET50 futures notional value has increased by more than three times.
Also, SET50 Index fluctuation means that investors need to deposit higher margins in order to trade. The new SET50 futures, or mini-SET50 futures, will have a contract size that is one-fifth that of the existing product. The contract multiplier will be reduced from Bt1,000 per index point to Bt200 per index point, resulting in a drop in size to about Bt200,000. Initial margins and exchange fees would be reduced by the same proportion, Kesara added.
TFEX, Thai Clearing House, and TFEX members are preparing to launch a mini-SET50 futures on the same day as the launch of a new derivatives trading system.
Derivatives markets in the United States and in Asian markets like India, Hong Kong, Singapore and Taiwan also reduce their contract sizes when their indices double, normally to one-fifth, but in some markets, contracts were reduced to half or one-tenth of their former size.
Mini-SET50 futures will also become the same size as SET50 options. Therefore, investors can develop strategies using SET50 futures and options, together with other products based on SET50 Index components as their underlying assets more easily.