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NEWS UPDATES Asean Affairs           29   August  2011

Merger of Thai futures exchanges is unlikely

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The prolonged effort to merge the operations of the country's two futures exchanges is unlikely to succeed under the current government, even though both markets are governed by ministers from the Pheu Thai Party, according to Sompol Kiatpaibool, the chairman of the Stock Exchange of Thailand.

A plan has been in the works for nearly three years to consolidate the Thailand Futures Exchange (TFEX) and the Agricultural Futures Exchange of Thailand (AFET) in order to save costs and improve operational efficiency.

The plan has been discussed in the past several governments, but it failed because the Finance Ministry, which governs the TFEX, or the Commerce Ministry, which governs the AFET, preferred to keep its own assets.

Korn Chatikavanich, the former Democrat finance minister, had pushed the issue in the cabinet but faced resistance from the Bhumjaithai Party thatcontrolled the Commerce Ministry.

Even with the new finance and commerce ministers both coming from Pheu Thai, executives from the AFET and the Agricultural Futures Trading Commission (AFTC) still oppose the plan, said Mr. Sompol.

He said the TFEX, a subsidiary of the Stock Exchange of Thailand, had potential to grow, but it still lacked agricultural products to offer investors.

Separate trading on the two markets has caused inconvenience for investors.

Also, the seven-year-old AFET still features very thin volume because it is unable to add attractive products.

Mr. Sompol said the TFEX in fact was allowed to offer agricultural futures products by itself under the Securities and Exchange Commission (SEC) derivative law amendment, but it is reluctant to offer duplicate products with the AFET.

"The TFEX may trade other agricultural products in the future as allowed by law, so we don't need to merge any more," said Mr Sompol.

"Thailand is the world leader for natural rubber exports, but the largest rubber futures trading market is the Tokyo Commodities Exchange (Tocom) in Japan. There is no doubt that Thailand should have the ability to build up futures trading for rubber or other agricultural products.

The TFEX should take the chance to expand trading volumes since we have our own natural resources."

Under the capital market development plan and Asean free trade agreements, market liberalisation will soon allow other exchanges to enter Thailand. If the other exchanges offer a full range of products, Thailand's two futures exchanges would be less attractive to investors, the SEC has said.


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