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Thailand Securities Depository to cut settlement time to T+2 by 2005

19 April 2004  |  357 views  |  0

President of Thailand Securities Depository Co., Ltd. (TSD), Mrs. Nongram Wongwanich, said the TSD will be updating its service to lower the number of days needed for securities clearing and settlement from the current T+3 to T+2 by the year 2005.

"Currently, the securities clearing and settlement is set at the third day after the transaction is made (T+3). If the duration of clearing and settlement is shortened to two days after the transaction (T+2), it will help reduce risk, enhance liquidity, and increase the efficiency in the clearing and settlement to international standards."

Currently, the countries which have the T+2 system include Germany, Hong Kong, Taiwan, Korea, India, and Turkey. The only country with a T+1 system is China. The trend for global capital markets see the United States and Canada moving to a T+1 system by the year 2005.

Mrs. Nongram said, "Thailand aims to achieve the T+2 system by the year 2005. The TSD will gradually move towards its goal and will work closely with agencies involved in the securities clearing and settlement to learn more about the problems and obstacles facing the move and then seek solutions. Once every party involved is ready, the new system will be launched."

"In moving towards T+2, the TSD must reduce the process involved in the purchase of securities from the time the transaction is made. Payment must be changed from the form of a check to an automatic transfer system (ATS), which will deduct the amount of money directly from an investor's bank account. Other processes include turning our system 100% scripless, developing an after-sales service, and drafting new measures to support foreign investors' purchases of shares in the T+2 system," Mrs. Nongram commented.

To gear up for this move, the TSD has developed its after-sales service, using the Straight Through Processing (STP) concept. This incorporates all aspects of after-sales service into one center and one system under an internationally accepted communications and technology scheme or Post Trade Integration. This development will serve as a basis to effectively shorten clearing and settlement period, reduce redundancy, reduce errors, as well as increase efficiency and safety. It will allow investors to receive the most updated information which will help reduce risk in clearing and settlement, enhance efficiency and lower costs for capital market transactions in general. The new system should be completed by the year 2004.

Mrs. Nongram added, "the TSD is ready to fix any problems that may occur and will move forth to develop a transaction confirmation system between brokers and custodians in a more speedy and efficient way, set a standard for competent risk management to accommodate the change in settlement period, draft new rules and regulations for the move, and publicize this new move to create a better awareness among those in the industry. It is hoped these measures will boost confidence among all related parties."

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