TFEX daily trade ticks up on volatility

Year-to-date daily trade of futures on the Thailand Futures Exchange (TFEX) averages 470,000 contracts, a considerable increase from the same period last year, buoyed by investors’ attempts to hedge against stock market volatility.

The same period in 2017 averaged 324,000 daily contracts, as investors this year have profited from market arbitrage and hedging through futures products, said TFEX managing director Rinjai Chakornpipat.

“As the stock market remains volatile, investors have used the futures market to profit from the market’s upward and downward movements through futures and options products,” said Ms Rinjai.

An arbitrageur would short-sell a higherpriced stock and buy a lower-priced one. Profit is made from the spread between the two assets.

She said the TFEX will celebrate its 12th anniversary on April 30 and the exchange plans to increase investment products and the number of investors.

The exchange wants to increase the number of underlying stocks for single stock futures from the current 100 stocks, which are mostly comprised of SET100 stocks. It is aiming for 150 stocks, with the qualification criteria including a market capitalisation of up to 10 billion baht with active trading and high liquidity.

Products with potential for continuing development are gold futures, rubber futures, and SET50 index options, said Ms Rinjai.

Foreign investors comprise some 10-15% of trading on the TFEX, most trading SET50 index futures, she said. Ms Rinjai anticipates their investment appetite increasing given that the futures market has greater liquidity.

“TFEX is a rising star compared with other new futures markets because of the rapid growth in trade volume and good market development processes,” she said.

The Futures Industry Association reported the world’s top five futures markets as of December 2017 were the Chicago Mercantile Exchange, with 4 billion contracts traded annually. The National Stock Exchange of India came second at 2.47 billion contracts, with the Intercontinental Exchange securing third position (2.13 billion contracts) and Chicago Board Options Exchange (1.81 billion contracts) fourth. Brazil’s B3 (1.81 billion contracts) was fifth.

In Asia, the Shanghai Futures Exchange occupied the top spot with 1.36 billion contracts traded annually on average last year. The TFEX was ranked 26th with 79 million contracts, the second-largest in Southeast Asia behind Singapore, which recorded 170 million contracts.