BLS gunning for No.1 in block trades
Bualuang Securities (BLS) aims to take the top spot for block trade among domestic securities firms this year, propelled by low margin loan expenses and commission fees.
Block trade is a block order or trade submitted for the sale or purchase of a large number of securities. The process involves trade at an arranged price between two parties, sometimes outside of open markets, to lessen the impact on the security’s price.
Some 2 billion baht in block trade is executed on the Stock Exchange of Thailand per day — 4-5% of the total market.
BLS deputy managing director Chaiyaporn Nompitakcharoen said the firm has a 12% market share for block trade or 250 million baht per day, a twofold increase from earlier this year.
BLS is targeting 15% market share by year-end as the company is confident of its service operations and cost competitiveness, Mr Chaiyaporn said.
He said BLS currently provides 1.3 billion baht in margin loans for block trade, adding that the loan cost expense of .25% is lower than that for average trading margin
loans, and the 0.1% commission fee is lower than the traditional trading rate of 0.25%.
Block trade provided by BLS covers 130 equities on the SET, which are more than half of the 165 block trade equities in the system.
There were nine securities firms offering block trade services in the past three years, but now it is offered by all securities firms since related transactions have grown rapidly on the back of lower interest costs compared with margin loans for securities trading.
Block trade also has a higher gearing ratio than margin loans. For example, collateral assets required for block trade are 20-30%, while the ratio is 40-50% of collateral for margin loans.
“Block trade will continue growing and traditional margin loans will expand at
a slower pace,” Mr Chaiyaporn said. “In developed markets such as Japan and the US, block trade has the most active trade, with total trading value between 60-70% of daily value.”
BLS has 300,000 trading accounts, of which a hundred are active in block trade, as this type of trade is appropriate for large accounts.
Meanwhile, he said one of the key areas that warrants monitoring is the yield gap between 10-year and two-year US government bonds, as it has become narrower at 0.24%, down from 0.4% earlier this year. Mr Chaiyaporn said the yield gap is at its narrowest point in a decade.
Narrow return between short-term and long-term bonds is a signal for the US central bank to embark on further interest rate hikes, he said.