The Thailand Securities Depository (TSD) says the reduction in the local settlement cycle from T+3 to T+2 will start on 1 June 2005. The switch is dependent on approval by the Thai Securities and Exchange Commission.
The TSD is joining forces with the Stock Exchange of Thailand to encourage settlement between investors and brokerage houses via the electronic fund transfer system.
Importantly, the Bank of Thailand (BOT) has agreed in principle to allow foreign investors to purchase Thai Baht without its approval – because it would be too difficult to obtain approval to purchase funds on such a short settlement timetable. On the current T+3 settlement timetable, foreign investors who want to buy Thai baht for value tomorrow (as well as same day value) has to secure central bank approval. On a T + 2 schedule, this would be too late.
“The changing of settlement cycle to T+2 will increase liquidity in Thailand stock market and also reduce settlement and clearing risk,” says a spokesman for Citigroup in Bangkok. “In addition, the Bank of Thailand’s amendment of the foreign exchange regulation will ease agent banks’ turn-around time in seeking prior approval on behalf of a foreign investor to purchase Thai baht.”