The Stock Exchange of Thailand has pitched the idea to the Bank of Thailand of allowing investors to trade in foreign currencies on the Thailand Futures Exchange (TFEX) with settlement expected in baht.
SET president Kesara Manchusree said the bourse sought approval on the matter previously, but the central bank rejected the idea out of concern over what it termed the uncontrollable flow of foreign currencies.
The bourse has been trying to promote multi-currency trade to accommodate foreign institutional investors by providing more variety of products and greater convenience.
Kesara: Eyeing gold spot exchange
If the central bank agrees, it will use the same trading pattern with all types of commodity products on TFEX.
Mrs Kesara said doing so would make futures trading more active, especially with the planned consolidation of the Agricultural Futures Exchange of Thailand.
TFEX is awaiting a legal amendment to trade agricultural products in multiple currencies.
Natural ribbed smoked sheet No.3 rubber is expected to be the first product sold via the new multi-currency method.
TFEX plans to launch a three-month futures contract for gold by the third quarter, expanding on the current two-month variety.
"Normally multi-currency trading is used for global products such as gold, rubber and indices, and we'll introduce several new products including gold spots once the central bank approves the trading," Mrs Kesara said.
She said the gold spot exchange had been delayed because it was limited by currency trading as well as a physical gold delivery requirement.
"The SET will try to offer other gold products based on what is allowed," Mrs Kesara said.
She said the Chinese futures exchange allowed gold exchange trading because China's central bank could manage physical delivery, while the Singapore Stock Exchange could offer wholesale gold trading due to its management through custodian banks.
"The Thai share market can provide only gold futures contracts, as our environment is different, but setting up a gold spot exchange to become a regional trading hub is still our plan," Mrs Kesara said.
Daily trading on the SET this year has averaged 50.5 billion baht, just below its target of 52 billion, which it attributed to weak Thai economic growth.
Foreign investors were net sellers of 10 billion baht in the first four months of this year.
"However, the SET currently has a price-to-earnings ratio in line with the region, so there won't be much selling from foreign investors from now on," Mrs Kesara said.