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Settlements Cycle

Equities: T+3 (or before on Big Lot*)
Debt: T+2
OTC: Negotiable
Money Market: Not applicable
* All of the following conditions must be met to be able to settle the trade on a gross basis and prior to or on T+3:
1. Trade of equities securities
2. Trade on the cash trading account
3. Trade on the Big Lot Board
4. Minimum trading value of TBH50 million

Over-the-Counter (OTC)
In Thailand, only corporate bonds and government bonds are traded on an OTC basis via the Thai BMA. The dealers (financial institutions holding debt securities license granted by the SEC) are required to report all bond transactions to the Thai BMA.

Acquisition or disposition of bonds and equities traded on the OTC market, which result in holdings to reach the threshold of any multiple of 5% of the total outstanding issued securities of a company, is also required to submit a Report of Acquisition or Disposition of Securities of a Business (Form 246-2) in accordance with Section 246 of the Securities and Exchange Commission Act.

Settlement Procedures

Settlement Date (SD-1)

* Instructions are sent via authenticated SWIFT Hexagon.
* Instruction deadlines for "against payment" as well as "free of payment" settlement are 00:00, SD, Bangkok time. These are currently, the latest custodian deadlines in the Thai market. Instructions that arrive after the deadline will be processed on a best-efforts basis.
* Pre-matching is carried out between brokers and custodians on SD-1. Pre-matching can be conducted via three different modes i.e. the Thailand Securities Depository Co. Ltd. (TSD) Net Clearing and Settlement System, telephone and file exchange.
* Data fields that are pre-matched include settlement date, whether receipt or delivery, security name, ISIN, counter-party details, whether foreign shares or local, security quantity, and payment amount.
* As pre-matching is viewed as mandatory in Thailand, it is important for buying investors to fund their account or to send a Notice of Receipt (SWIFT format MT210) to their broker/custodian by SD -1. Otherwise, settlement may fail.

Settlement Date

* On the morning of SD itself, the sub-custodian checks with the cash corresponding party according to MT210 whether the funds will be paid on that date or not to ensure that client’s account is well funded to avoid any overdrawn position. If instructions are received by SD-2, they will endeavor to pre-match them with the counter-parties who are willing to pre-match. If any mismatched details are found, the client will be advised via MT548.
* Securities movements, processing and recording take place through the Thailand Securities Depository Co Ltd (TSD) Net Clearing and Settlement System. Brokers and custodians are members of this system. Each TSD member normally has two accounts with the TSD. Cash and securities are transferred between members with the TSD acting as the go-between.
* On the morning of SD (10:30-11:30), the central depository will produce a report which details the net amount either owed by the member to the depository or vice versa. Thus only one payment via Central Settlement System (CSS), Bank of Thailand’s (BOT) electronic fund transfer system, is either paid by each clearing member to the BOT for the TSD’s account every day or vice-versa, being the net sum of all trades with all counter-parties of the particular counter-party on that particular day.
* The TSD Net Clearing and Settlement System facilitates the transfer of securities between members on a net basis. The movement between member accounts can be seen via a computer link with the TSD and is final at 14:15 on SD. This system has reduced counter-party risk and the fail trade rate.
* Settlement confirmations are provided via SWIFT or as required by the clients. SWIFT messages used are MT544/5/6/7, and these are produced throughout the day on a real-time basis.

Cash settlement

* As pre-matching is mandatory in Thailand, it is important for buying investors to fund their account or to send a notice of receipt (MT210) before the instruction deadline of 00:00 on SD, as buying trades may otherwise fail. In the morning of SD, the cash corresponding party is checked according to the MT210 to ensure that the client’s account will be funded to avoid an overdrawn position.
* Funds are transferred by Bahtnet2, which is the Bank of Thailand (BoT)’s interbank transfer system ‘Bahtnet2′ extended to the securities industry, where funds clear on a same-day basis. Since Bahtnet2 is not yet interfaced with the securities clearing system, true DVP may remain elusive for the foreseeable future.

Please refer to the attached clearing and settlement flowchart for SET listed securities in Thailand:

Thailand - Clearing and Settlement.pdf


Thailand’s domestic debt market has undergone a major structural change since the flotation of Thai Baht in July 1997. Market capitalization grew from THB546.80 billion ($12.50 billion) at the end of 1997 to THB2, 518billion ($65bn) as of December 2003.
The market went from being denominated by corporate bonds and short-term corporate bills of exchange to a fully tradeable Government bonds with yield curve extending out to 20 years. Current average daily turnover hovers around $488.96m.

Scripless fixed income securities are normally settled on T+2.

Corporate Bond Settlement
Scripless corporate bond settlement is done through the SDC’s scripless system on a rolling T+2 basis outside net clearing system. Payment method would be agreed upon both counter-parties whether it would be in form of broker/bank cheques or through electronic funds transfer (Bahtnet system). Physical corporate bond is settled over-the-counter between agreed two counter-parties, against cheques or funds transfer. Fixed income securities can be scripless and settled on a rolling T+2 basis through the Thailand Securities Depository Co Ltd (TSD). For those bonds that are listed, settlement is taken place in the Net Clearing & Settlement system. However, for those non-listed, at the TSD, settlement takes place outside the Net Clearing & Settlement system, against a broker/bank cheque.

Most corporate debenture trading is done predominantly over-the-counter and it is settled in scripless form through the Thailand Securities Depository’s system in a transfer system. In addition, there are some of the corporate debentures issued by listed companies are listed and traded on the SET which is recently named "Bond Electronic Exchange" or BEX.

Government Bond Settlement
Government bonds and government guaranteed state enterprise bonds (SOEs) are settled on T+2 and in registered scripless form with the TSD, acting as the clearing and settlement agent, through the PTI system. While securities are transferred via the PTI system, cash is transferred via BAHTNET system. Delivery free of payment transfers bond ownership, but leaves payment to be settled independently. Physical government and state enterprise bonds are transferred through the BOT. Payment can be made either via BAHTNET system or via check as agreed between both the buyer and the seller.

Bank for International Settlements Model (BIS):

Thailand’s settlement model follows BIS Model 3: a system where the net settlement of securities and cash is undertaken on T+3, but not simultaneously. The settlement of securities is done through the TSD’s multilateral netting system with the cash settlement undertaken through the Bank of Thailand’s Automated High Value Transfer Network (BAHTNET) payment system. TSD acts as central counter-party for both cash and securities settlements.

Book-Entry: Securities held at the depository are transferred automatically on settlement date.

Physical: Reregistration of physical securities is accomplished by issuing new certificates or by endorsing old stock certificates. Positions out for registration cannot be sold. Registration time-frames vary from two to four weeks (where TSD acts as registrar) and four to six weeks (where companies act as their own registrar).

Payment Systems
There are three main payment systems in Thailand, which are all provided for and supervised by the Bank of Thailand (BoT):

* cheque payments;
* BahtNet II payments (real-time electronic transfer), which are routed via the banks’ accounts with the BoT;
* MediaClearing (off-line electronic transfer executed overnight).

BahtNet II and MediaClearing payments are good funds. Cheques take one day for clearing in the Bangkok Metropolitan area but may take longer upcountry.

On October 1, 1997, custodian banks joined the Thailand Securities Depository’s (TSD) Net Clearing and Settlement System. This system was previously only available to brokers. It allows for netting of securities and cash between the TSD and each individual member. This new system largely replaced the previous system, where settlements were made against the respective counter-party. The ‘old’ system remains however in place, and can still be used for exceptional cases (late settlement) and fixed income securities settlements.

On September 8, 2000, the TSD introduced securities payment by cheque with electronic funds transfer through the settlement banks and the Bahtnet system of the BoT, instead of using cheques. Through this process, custodians can make payments via the Bahtnet system; whereas brokers can pay for their securities via the two settlement banks, the Siam Commercial Bank Public Co Ltd and the Bangkok Bank Public Co Ltd. The TSD will therefore act as an intermediary in the securities clearing and settlement between settlement A, settlement B and the custodians through the Bank of Thailand’s Bahtnet system.

Brokers send/receive the payment to/from their settlement banks, which will send/receive that payment to/from the TSD through the Bahtnet system. Custodians will send/receive the payment to/from the TSD through the Bahtnet system.

Overdraft Permitted
Due to the tight restrictions on non-residents as regulated by Bank of Thailand (BoT), intra-day or overnight overdraft facilities, are not available to non-residents. On-shore financial institutions are requested for co-operation to refrain from entering into financial transactions beyond THB50 million per non-residents counter-party without underlying trades or investment in Thailand. Said restriction applies to granting of THB facilities or creating contingent liabilities resulting in ultimate payment of foreign currency to non-residents. The granting of credit facilities means direct loan, overdraft facility, buy-sell swap, currency swap, interest rate swap, forward rate agreements option, and repurchase agreement. In practice, it is difficult for commercial banks to monitor the facilities not to exceed the limit per client across other banks in Thailand, therefore the facilities are not provided.