Securities Lending Times | Thailand to lift short selling restrictions

The Stock Exchange of Thailand is set to revoke restrictions on short selling as of 1 October that were put in place in March during the worst episode of COVID-19 market panic seen so far.

The exchange imposed an uptick rule on short sales in mid-March after Thailand’s equity markets suffered heavy losses as the pandemic spread through Asia. The rule was initially due to expire on 30 June but was extended to reflect the on-going market turmoil.

From October, normal rules on the pricing of short sales include a +/-30 percent
ceiling and floor limit, with no up-tick rule.

Whereas, Thailand Futures Exchange will also reapply the +/-30 percent daily price limit rule, effective from the same date.

The decision was welcomed by the Pan Asia Securities Lending Association (PASLA) which is also encouraging other Asian markets with short selling restrictions, such as South Korea, to follow suit.

South Korea recently decided to extend its blanket ban on short selling until 2021 instead of letting it expire this month.

The country’s regulator cited concerns over fresh market volatility caused by a resurgence in COVID-19 cases in the country as justification for the six-month push back.

PASLA, in response, is calling on Asian market overseers to consider how “transparent, regulated short-selling can benefit all market participants by creating liquidity, allowing investors to manage risk and encouraging good corporate governance”.

The association also believes that markets in which participants can express different views on stock prices will be more attractive to global investors and better positioned to “support economic growth and prosperity”.

Elsewhere, Taiwan’s Financial Supervisory Commission (FSC) revoked its ban on short selling transactions in June, 10 days earlier than expected due to calmer trading conditions following the extreme volatility caused by the spread of COVID-19 in February and March.

The restriction had been in place since 20 March and applied to equities traded on the Taiwan Stock Exchange and the Taipei Exchange that declined by more than 3.5 percent or more in value in a single trading session.

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