History & Roles
Introduction The modern Thai Capital Market traces its origins back to the early 1960s. In 1961 Thailand implemented its first five-year National Economic and Social Development Plan to support the promotion of economic growth and stability as well as to develop the Kingdom's standard of living. Following upon this, the Second National Economic and Social Development Plan (1967-1971) then proposed for the first time that an orderly securities market be established in order to mobilize additional capital for national economic development.
The creation of Thailand's first officially sanctioned and regulated securities market was initially proposed as part of the Second National Economic and Social Development Plan (1967-1971). In outlining its proposal for the creation of a supervised securities market, the Second National Development Plan stressed that the market's most important role would be to mobilize funds to support Thailand's industrialization and economic development.
The modern Thai capital market can essentially be divided into two phases, beginning with "The Bangkok Stock Exchange" which was privately owned, followed by the establishment of "The Securities Exchange of Thailand".
Establishment of the Bangkok Stock Exchange
The inception of the Thai stock market began as far back as July 1962, when a private group established an organized stock exchange as a limited partnership. The group later became a limited company and changed its name to the "Bangkok Stock Exchange Co., Ltd." (BSE) in 1963.
Despite its well-intended foundation the BSE was rather inactive. Annual turnover value consisted of only 160 million baht in 1968, and 114 million baht in 1969. Trading volumes continued to fall sharply thereafter to 46 million baht in 1970, and then 28 million baht in 1971. The turnover in debentures reached 87 million baht in 1972, but stocks continued to perform poorly, with turnover hitting an all time low of only 26 million baht. The BSE finally ceased operations in the early 1970s.
It is generally accepted that the BSE failed to succeed 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, officially supported securities market in Thailand had by then attracted considerable attention. In this regard, the Second National Economic and Social Development Plan (1967-1971) proposed, for the first time,
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. Professor Robbins had previously served as Chief Economist at the United States Securities and Exchange Commission. The same year proved an eventful one for the Thai capital market, as the Bank of Thailand also formed a Working Group on Capital Market Development, which was assigned the task of establishing the stock market. A year later, in 1970, Professor Robbins produced a comprehensive report entitled "A Capital Market in Thailand". This report became the master plan for the future development of the Thai capital market.
In 1972 the Government took a further step in this direction by amending the "Announcement of the Executive Council No. 58 on the Control of Commercial Undertakings Affecting Public Safety and Welfare". The changes extended Government control and regulation over the operations of finance and securities companies, which until then had operated fairly freely. Following these amendments, in May 1974, long-awaited legislation establishing "The Securities Exchange of Thailand" (SET) was enacted. This was followed by revisions to the Revenue Code at the end of the year, allowing the investment of savings in the capital market. By 1975 the basic legislative framework was in place and on April 30, 1975, "The Securities Exchange of Thailand" officially started trading. On January 1, 1991 its name was formally changed to "The Stock Exchange of Thailand" (SET).
The Securities and Exchange Act of 1992 (SEA), stipulates the Securities and Exchange Commission (SEC), a single unified supervisory agency, 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. The SEA also provides a clear separation between the primary and the secondary markets to facilitate their successful development. Both primary and secondary markets are regulated by the SEC.
The SEC oversees and regulates the primary market. In this regard, a company wishing to issue new securities, carry out an initial public offering (IPO) or offer additional securities to the public must first apply for SEC approval and comply with its filing requirements. The SEC is then required to carefully review the financial status and operations of the company before allowing the firm to issue securities to the public.
Following the initial public offering, securities may be traded in the secondary market once the issuer has applied for and been granted approval by the SET.
As defined in the SEA (1992), the SET's primary roles are:
- To serve as a center for the trading of listed securities, and to provide the essential systems needed to facilitate securities trading;
- To undertake any business relating to the Securities Exchange, such as a clearing house, securities depository center, securities registrar, or similar activities;
- To undertake any other business approved by the SEC.
- The Stock Exchange of Thailand is a juristic entity set up under the Securities Exchange of Thailand Act, B.E. 2517 (1974). Operations started on April 30, 1975.
- Its mandate is to be a market or center for the trading of listed securities, and promoter of financial planning, as well as provide related services connected to such activities, without distributing any profits to members.
- Encourage the general public to become shareholders in a variety of local industries.
- It operates under the legal framework laid down in the Securities and Exchange Act, B.E. 2535 (1992).
- Its main operations include securities listing, supervision of listed companies and information disclosure, trading, market surveillance and member supervision, information dissemination and investor education.
- Asian and Oceanian Stock Exchanges Federation (AOSEF): joined as full member in 1982.
- International Organization of Securities Commissions (IOSCO): came in as full member in 1990. Then, when the Securities and Exchange Commission (SEC) was established in 1992, it became the full member and the SET moved to affiliate member.
- World Federation of Exchanges (WFE): joined as full member in 1990.