Brokerage firms ask regulators to supervise high-frequency trading, which can cause wild stock swings.
Ministry urged to waive dividend tax
Brokerage firms have asked regulators to supervise high-frequency trading (HFT), which can cause wild stock swings, and requested the Finance Ministry waive the dividend tax to increase long-term investors.
Stock regulators should consider whether HFT is an appropriate tool, as such trading occasionally distorts the market, said Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organizations.
“In some countries such as the US, market regulators use a ‘speed bump’ tool to control HFT programmes to reduce market volatility,” he said. “The Thai stock market has frequently overreacted compared with others in the region, with a recent plunge of about 4% in a single day, which is too much and doesn’t regularly happen in sustainable markets.
“It’s time to be cautious about this kind of trading. We need good quality institutional investors rather than those causing high volatility.”
Retail investors account for 34-35% of the total, down significantly from 60% five years ago. The share of foreign investors, HFT and brokerage investment has increased.
Mr Paiboon, who is also chief executive of Tisco Securities, wants the Finance Ministry to lower or even waive the dividend tax to increase the number of long-term investors and tame the stock market’s roller-coaster movement.
Commenting on the Securities and Exchange Commission’s three-year plan through 2022, he said some issues such an increase in the investor base and how to solicit potential investors to save more through the stock exchange and markets are not included in the SEC’s plan.
Sakkarin Ruamrangsri, the SEC deputy general, said the Stock Exchange of Thailand (SET) informed him that it would handle the HFT issue.
Mr Sakkarin said the SET is already using artificial intelligence (AI) for the early stages of probes and the outcome has been positive.
Adoption of AI will go before the SEC’s board of directors at the next meeting scheduled for March 5.
AI will be used for stock trading probes before being extended to other areas like digital products and HFT.
Meanwhile, SEC secretary-general Ruenvadee Suwanmongkol asked the Association of Securities Companies to submit a new business model or reform plan to address brokerage firms’ sliding profits after their aggregate net profit plunged to 5.4 billion baht last year from 8 billion baht in 2018. Twenty-one firms posted a net loss.
Securities firms’ business model needs to adapt to the current market environment in which intense competition has sparked trading fee cuts
‘‘ We need good quality institutional investors rather than those causing high volatility.
PAIBOON NALINTHRANGKURN
Chairman, Federation of Thai Capital Market Organizations
to 0.09% — a level lower than operating costs, Mrs Ruenvadee said, noting that many still rely on brokerage fees as core revenue.
Moreover, the number of retail investors is down sharply, so brokerage houses that have failed to diversify are suffering losses.
The SEC will adopt AI for stock manipulation investigations as a way to shorten the examination period, Mrs Ruenvadee said.