Thailand’s SEC Unveils DLT Trading Platform to Modernize Digital Securities Market

TLDR:

• Thai SEC plans to launch DLT-based trading system for digital securities and tokens, aiming to reduce traditional 7-14 day bond trading process
• Four digital token projects approved with two more under review, focusing on green tokens and investment-based initiatives
• Securities companies will be allowed to trade digital tokens to leverage their large investor bases
• Companies can use their own DLT infrastructure or utilize SEC’s public chain, with emphasis on maintaining interoperability standards
• System will support both new electronic securities and tokenized traditional securities with features like fractional trading and real-time settlement

Thailand’s Securities and Exchange Commission (SEC) has announced plans to implement a new trading system based on distributed ledger technology (DLT) for digital securities and tokens, marking a major step in the country’s push toward market modernization.

The new system aims to address current inefficiencies in Thailand’s bond and securities markets, where traditional trading processes can take between 7 to 14 days before securities become tradable in the secondary market. Deputy Secretary-General Jomkwan Kongsakul highlighted these delays as a key motivation for the technological upgrade.

Under the current system, investors face several challenges, including limited access to products and issues with bond liquidity. Manual processes and paperwork create additional delays and increase the risk of errors in transaction processing. The new DLT-based platform seeks to eliminate these obstacles by digitalizing the entire trading process.

The SEC has already made progress in implementing the new framework, having approved four digital token projects. Two more projects are currently under review, with a focus on green tokens and investment-based initiatives. The regulator is also in preliminary discussions with five other parties about potential opportunities in soft power tokens and innovative green token fundraising.

To expand market participation, the SEC plans to allow securities companies to engage in digital token trading. This move takes advantage of these companies’ established investor networks and could help broaden market access for digital securities.

The new trading system will operate on a flexible infrastructure model. Companies that already have their own DLT systems will be permitted to develop independent chains, provided they maintain interoperability with the broader network. For firms without existing infrastructure, the SEC will offer access to its public chain at what it describes as reasonable costs.

A key feature of the platform is its comprehensive approach to digitalization. The system will handle all aspects of securities trading, including settlement, trading execution, investor registration, and return payments. This end-to-end digital approach aims to create a more efficient and accurate trading environment.

The SEC’s platform will support two distinct types of securities. The first category includes digital-native products that are created and traded exclusively through DLT. The second encompasses traditional securities that will be converted into digital form as “twin products” for trading on the DLT system.

This dual approach allows for new trading features such as fractional ownership, which could make securities more accessible to a broader range of investors. The system is also designed to enable real-time trading and reduce settlement problems that plague traditional markets.

To support market analysis and investment decisions, the SEC is developing an Open API data platform that will provide information about all listed companies. This tool aims to improve market transparency and help investors make more informed choices.

The initiative aligns with Thailand’s broader efforts to embrace digital finance, even as the country maintains restrictions on cryptocurrency payments. In a separate development, the government is testing cryptocurrency payments for foreign tourists in Phuket as part of a pilot program.

Recent reports suggest that Thai officials are considering the possibility of issuing a government bond-backed stablecoin, though no official confirmation has been made. The country’s central bank has also partnered with the Hong Kong Monetary Authority to explore cross-border tokenization projects.

The SEC emphasizes that the new system will maintain competitive market conditions through its open infrastructure approach. A standardized framework for data connectivity will ensure smooth operation across different platforms within the digital securities ecosystem.

Development of the shared ledger system that will connect various trading chains is nearing completion, according to SEC officials. This infrastructure will serve as the backbone for the modernized trading system.

The implementation timeline includes plans for rolling out new regulations to facilitate electronic securities issuance and online debenture purchases. These rules will help establish the legal framework for the new digital trading environment.