Stock Exchange Overhauls Trading Rules to Prevent MSCI Downgrade
Thailand's stock exchange is consulting on major trading rule changes through May 29 to prevent a downgrade by MSCI, including reduced tick sizes, stricter short-selling controls, and fees on high-frequency trading accounts.
The Stock Exchange of Thailand is opening public consultation from May 13-29 on major trading measure revisions, including reducing tick sizes, controlling short selling and high-frequency trading, and imposing extra charges. The exchange aims to boost liquidity, strengthen investor confidence, and prevent Thailand's stock market from being downgraded by MSCI from Emerging Market to Frontier Market status amid competition with other Asian markets.
Assadej Kongsiri, chairman and chief executive of the Stock Exchange of Thailand, revealed that the exchange is soliciting feedback from investors and stakeholders on "confidence-enhancing measures" between May 13-29, 2025. The review aims to improve trading supervision efficiency in line with strategic plans to create opportunities, enhance liquidity, and boost confidence, while following recommendations from OECD and MSCI to maintain the Thai stock market's appeal to foreign investors and prevent investment downgrades.
The core measures are divided into three main groups covering market efficiency improvements, abnormal volatility reduction, and inappropriate trading behavior control. The first group focuses on market quality and fairness by reducing tick sizes for stocks priced between 5-50 baht to narrow bid-ask spreads, improve order matching opportunities, and reduce investor costs while increasing market liquidity.
Simultaneously, the exchange will impose extra charges on accounts with high order volumes but low execution rates, or High Order-to-Trade Ratio (OTR). Accounts with OTR exceeding 100 times and sending more than 50 orders per minute will face a 0.15-baht fee per transaction for volumes exceeding 30,000 trades daily, reflecting true costs and reducing trading system burden.
The second measure group addresses stock price volatility by improving the Uptick Rule for short selling. If a stock's price drops 10% or more from the previous close, the Uptick Rule will apply the next trading day to slow selling pressure and maintain market balance, while normal conditions will use the Zero-Plus Tick rule.
Additionally, short selling will be restricted to high-liquidity securities including SET100 stocks, ETFs, DRs, and Single Stock Futures underlying stocks, while banning short selling on ETF and DW underlying securities. The exchange also proposes eliminating the individual Dynamic Price Band (DPB) to reduce trading obstacles, especially for low-liquidity stocks.
For controlling inappropriate trading behavior, the exchange will register High Frequency Trading (HFT) participants by shifting evaluation criteria from post-trade actual behavior, such as order frequency, daily trading volume, and Dedicated API usage, for more accurate monitoring.
The exchange also proposes removing restrictions on securities that HFT can trade, as short-selling criteria will now cover only high-liquidity stocks. Additionally, the Minimum Resting Time (MRT) requirement will be eliminated after finding few qualifying transactions and ineffective behavior control. Instead, the exchange will use AI systems and extra charge measures to detect abnormal behavior.
Assadej stated that this trading supervision review and improvement will align with market conditions and investment behavior patterns.
