Stock Exchange of Thailand

Table of Content | | History of SET| 1| Establishment of SET| 1| Vision & Mission| 1| Regulatory Framework of the Capital Market| 2| Operations| 3| Board of Governors| 3| Management| 4| SET’s Role| 5| Corporate Governance Center| 6| Products and Services| 6| Revenue Structure| 12| Financial Events that Affect SET| 12| SET and the World Stock Exchange| 15| SET and Asian Stock Exchanges| 16| Comparison of SET, SGX and NYSE| 17| Index Composition Comparison between SGX and SET| 18| Stock Index Comparison| 18| Future move of SETConclusion| 2022| Stock Exchange of Thailand History of the Stock Exchange of ThailandThe modern Thai Capital Market was started in 1961 when Thailand implemented its first five-year National Economic and Social Development Plan. It supports the promotion of economic growth and stability as well as develops the Kingdom's standard of living. After that, the Second National Economic and Social Development Plan (1967-1971) proposed to set up an orderly securit ies market in order to gather additional capital to support Thailand's industrialization and economic development. The modern Thai capital market can be divided into two phases, â€Å"The Bangkok Stock Exchange† which was privately owned and â€Å"The Securities Exchange of Thailand†.The BSE finally ceased operations in the early 1970s because of a lack of official government support and a limited investor understanding of the equity market Establishment of the Stock Exchange of Thailand Despite the failure of the BSE, the concept of an orderly security market had attracted a lot of Thai people attention. In 1969, as recommended by the World Bank, the government acquired the services of Professor Sidney M. Robbins from Columbia University to study the development channels of the Thai capital market.In 1972 the Government took a further step in this direction by improving the â€Å"Announcement of the Executive Council No. 58 on the Control of Commercial Undertakings A ffecting Public Safety and Welfare†. The changes were allowed Government to control more over the operations of finance and securities companies. After that, in 1974, â€Å"The Securities Exchange of Thailand† (SET) was enacted allowing the investment to save in the capital market. By 1975, the basic legislative framework was in place and the Securities Exchange of Thailand officially started trading.On January 1, 1991 its name was formally changed to â€Å"The Stock Exchange of Thailand† (SET). Vision Empowering business and investors through our strengths to match the right financial opportunities Mission Clients and Intermediaries â€Å"Expand business issuers and investor base by satisfying their financial needs and strengthening intermediaries for mutual growth and success† Products and Services â€Å"Offer a wide range of attractive products and services to create value and match financial opportunities across different segments of business and inve stors† Operations Operate with flawless execution according to international standards to ensure efficiency, effectiveness, flexibility and global connectivity† People and Culture â€Å"Inspire staff to perform up to their fullest potential and create a corporate culture that aims at achieving excellence in matching the right financial opportunities for business and investors† Regulatory Framework of the Capital Market The Securities and Exchange Act of 1992 (SEA), specified the Securities and Exchange Commission (SEC) as the regulator of the Thai Capital Market.While the SEC oversees the development of the Kingdom's capital market, the Bank of Thailand (BOT) is responsible for the country's money market. Primary Market The SEC looked over a company that wants to issue new securities, an initial public offering (IPO) or additional securities to the public. The company must first apply for SEC approval and comply with its filing requirements. Then, the SEC is requi red to review the financial status and operations of the company before allowing the firm to issue securities to the public. Secondary MarketSecurities may be traded in the secondary market once the issuer has applied for and been approval by the SET. Operations The Stock Exchange of Thailand is a juristic entity that was set up under the Securities Exchange of Thailand Act, B. E. 2517 (1974). Operations started on April 30, 1975. Its main operations include securities listing, supervision of listed companies and information disclosure, trading, market surveillance and member supervision, information dissemination and investor education. Moreover, its duty is to promote saving and long term financial planning for developing the economy.SET is a center for trading of listed securities without distributing any profit to members. Board of governors Regulatory Framework The SET Board of Governors is comprised of a maximum of eleven people, five of whom are appointed by the SEC, and five who are elected by SET members. The SET President, appointed by the Board, is an ex-officio member of the Board. The Board is also responsible for formulating the SET policies. Management The organizational chart of SET can be classified into two major parts which are Exchange Function and CMDF Function.Each function’s organizational structure can be seen below. | | SET's Role The Stock Exchange of Thailand has been continuously improved the management system of listed Thai companies to have good governance. SET was started to study about the roles  of audit committee in 1995 before the financial crisis. After that, it issued a listing requirement indicating that all listed companies have an audit committee in early 1998. In that year, the SET also issued a guideline namely â€Å"Code of Best Practices for Directors of Listed Companies† to be a guild role of audit committee.Two years later, the Good Corporate Governance Committee, consisting of representatives from a variety of professional organizations, disseminated a report on corporate governance which set a framework to be used by organizations in the Thai capital market for developing good corporate governance systems and practices. The Thai government designated the â€Å"Compass for Good Corporate Governance† and set up the National Corporate Governance Committee (NCGC). In the same year, SET also proposed fifteen principles of good corporate governance for listed companies to implement.The listed companies have to apply the fifteen principles and are required to demonstrate in their annual registration statement (Form 56-1) and annual reports starting from the accounting period ending December 31, 2002. In July 2002, the SET has established the Corporate Governance Center to help listed companies develop their corporate governance system. The Center provides consulting services to and exchanges ideas about corporate governance practices with directors and executives of listed c ompanies, as well as those of firms preparing to be listed companies.Corporate Governance Center Background The SET has established the Corporate Governance Center to support listed companies. It encourages the company to have good corporate governance and stakeholders include shareholders, suppliers, customers, creditors, employees, and the community etc. Corporate Governance Center builds to have confidence investment in Thai capital market which support the knowledge about corporate governance including the developing good corporate governance system and practices. . The Center of consulting service Giving advises and exchange idea about corporate governance practices with directors and executives of listed companies as well as those of firms preparing to be listed companies. 2. Corporate Governance Self Assessment Evaluation was followed by the rule of listing company 3. Producing and disseminating a variety of information and materials as guidelines. 4. Holding activities to he lp educate listed companies' directors and executives. Products and ServicesOne of the SET’s missions is to â€Å"Offer a wide range of attractive products and services to create value and match financial opportunities across different segments of business and investors. † SET has continuously developed new products and services and improved the system to satisfy needs of the investors. SET group supervises trading activities and market participants to ensure that the market is fair, orderly, and transparent. The products and services of SET are as following. Product The products that SET offers can be classified into 5 major categories; equities, bonds, derivatives, exchange-traded fund (ETF), and derivative warrants.The more details of each type are discussed as following. 1. Equities Equity trading is the trading of securities issued by public companies where shareholders have a direct stake in the company as well as the right to vote in shareholders’ meeting s. The secondary markets for equities trading are The Stock Exchange of Thailand (SET) and Market for Alternative Investment (MAI). Types of equities are ordinary shares, preferred share, warrants, unit trusts, non-voting depository receipt, and depository receipt (DR). SET and MAI are different in terms of the types of equities traded.On SET, investors can trade all types of equities, whereas on MAI preferred shares and depository receipt (DR) are not traded. Market for Alternative Investment or MAI was established in June 1999 in order to encourage the smaller firms with potential high growth and innovation. MAI serves as a new fund-raising source for such firms and new alternative investments for investors who are interested. The vision of MAI is â€Å"We strive to be the right and efficient exchange creating value for high potential, innovative and ventures companies in ASEAN. † The core values of MAI are to be focus, accountable, networking, zealous, and innovative. . Bo nds After a bond is issued and sold in the primary market, the bond can be electronically traded through Bond Electronic Exchange (BEX), where investors can buy and sell bonds. The market was first launched on November 26th, 2003, and its goal is â€Å"to develop all facets of the Thai bond market to reach an international standard, on par with other mature bond markets in the rest of the world†. 3. Derivatives Derivatives are traded through Thailand Futures Exchange or TFEX which was established on May 17th, 2004. TFEX play a big role in Thailand economy in stabilizing and sustaining financial market and corporates.Derivatives are used to protect companies from unanticipated change of underlying assets which might be the raw material of the company. In other words, TFEX allows investors to hedge their risk by utilizing derivative products. TFEX has continuously introduced new products to be traded on the market. Up to the present, TFEX has a total of 11 products in 5 categor ies, which are equity, interest rate, precious metal, energy, and currency. First category, equity derivatives have a total of 4 types, which are SET 50 Index Futures, SET 50 Index Options, Sector Index Futures, and Single Stock Future.Second, derivatives that are traded on interest rate are 3-Month BIBOR Futures, 6-Month THBFIX Futures, and 5-Year Government Bond Futures. Third, derivatives for precious metal are 10 Baht Gold Futures, 50 Baht Gold Futures, and Silver Futures. Forth, derivative on energy price is Brent Crude Oil Futures. Fifth, the currency derivative is USD Futures. 4. ETF Exchange-traded fund or ETF is an open-ended mutual fund which is traded on the stock exchange. Through brokers, ETF investors can buy and sell at any time during the trading hours at the prevailing price when the order is executed.The main difference between normal mutual funds and ETF is that mutual fund is normally traded via asset management company or a fund issuer at the end of the trading day while ETF has real-time NAV or Indicative NAV which is calculated throughout the trading hours. With the help of designated market maker or liquidity provider, it allows investors to trade at the market price at any time. ETF is a passive management fund since it basically invests in a basket of underlying stocks which can be SET 50 Index, a stock sector index, commodity index and commodity price such as gold price and oil price.Mostly, ETF is the replicate of a stock index, making the expense and management fee lower for ETF. In contrast, mutual fund is more active making the cost of management more expensive as well. 5. Derivative Warrants (DW) Derivative Warrants give the holder right to buy a stock or an underlying security at the pre-determined price within the stated period for certain quantity. The issuer of derivative warrant is a third party, not the issuer of the underlying securities. Warrants and Derivative Warrants are different in many aspects, as shown in the foll owing table Services 1. Information serviceDue to SET comprehensive, accurate and up-to-date source of Thai listed companies information, SET provides information service for customers who would like to access and disseminate trading or listed company information either with commercial or non-commercial purpose. Major customers of this service are member companies, data vendors, presses, academic institutes, mutual funds, governmental agencies and general investors. SET Information Service is classified into 3 categories; a. Datafeed (raw data for further application) b. SETSMART or SET Market Analysis and Reporting Tool c.IR website service for SET listed companies 2. Listing service on SET Companies that are interested in listing itself on SET have to meet many rules and regulations. Being a listed company gives the company many advantages. The company will have a larger source of long-term capital that is crucially important to enhance its operation, expansion and competitiveness . The company will obtain a better and positive public image due to its high standard and transparency giving the company with higher bargaining power and company’s credibility. Application fees| Initial fees| Annual fees| | THB 50,000| 0. 5% of paid-up capital ( With minimum and maximum of THB 100,000 – THB 3,000,000 )| Regressive rate varies with the level of paid up capital as follows:   | less than| THB 200 M. | at 0. 035 % of paid-up capital| THB 200 M. | < Capital