How multi-asset exchange technology helped SET take the lead

Blog - 2017.12.07

In 2010, the Stock Exchange of Thailand set out an ambitious goal: to reposition SET as the regional center for the ASEAN capital markets, and strengthen its market position in the international arena.

They knew they had the potential to become a market leader in the region, but to make them competitive in the global marketplace, they needed to improve their technology radically. The exchange launched a five-year technology master plan to create an infrastructure capable of boosting the efficiency and vitality of the Thai capital market and support its long-term growth.

Ease of access

At that time, SET had two trading platforms and a mix of systems developed in-house and by third parties. To make life easier for their clients and improve operational efficiency, SET decided to merge their equities and derivatives markets into one common trading platform, and make it accessible through standard industry interfaces.

The improved accessibility was especially important to attract a broader international trading community. They also needed the capacity to manage higher levels of throughput, offer lower latency to support high-frequency trading, and reach a higher level of compliance with international standards. They also wanted to connect to other markets in the region to attract more liquidity.   

One platform

After a selection process involving all major exchange technology vendors, SET selected a multi-asset trading system in June 2011 to replace its two legacy systems. Only one year later, phase one went live with the cash equities market as the first to make the switch, as it was the asset class with the most pressing need for an upgrade. This was followed by the derivatives market in phase two. The two phases reflect the fact that the previous infrastructure consisted of two separate systems with different structures, memberships, and member communities.

To further streamline the infrastructure and improve the service for its clients, the platform was also integrated with a sophisticated data dissemination system, a real-time index engine, and a market surveillance system. This means that investors got one single interface to all of SETs markets and can trade both equities and derivatives on the same trading platform rather than multiple platforms and memberships. 

The new platform also enables multi-currency trading, and by incorporating the use of industry-standard interface FIX, SET has grown its business from foreign investors significantly, now representing 26% of the total trading value. The average daily trading by this investor group increased by 50% only between 2015 to 2016, from THB 8.83 billion in 2015 to 13.43 billion in 2016. Between 2011-2016 the trading value has grown by an entire 100%. 

Moreover, in 2016, the Thai bourse was the most liquid equities market in ASEAN for the fifth consecutive year.

Massive growth in the derivatives market

Since the launch of the derivatives market on the new platform in May 2014, derivatives trading has accelerated and volumes have steadily grown. The number of contracts traded on the Thai derivatives market (TFEX) grew by 320% from 2013 to 2016, and open interest grew by 460%.

Volume (contracts) SET graph.jpg

Growth in the derivatives market

This positive upward trading spiral has also motivated several prestigious awards for TFEX, SETs derivatives subsidiary, including FOW award for Asia’s Best Technology Innovation, and then more recently the “Best Technology Innovation by an Exchange” at the FOW International Awards 2015.  

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