SET encourages automatic trading to boost liquidity

       The SET hopes to encourage more institutional investors and brokers to use programme trading methods to help support market liquidity.
       Algorithmic trading should become more popular in the future, said Sopawadee Lertmanaschai, chief marketing officer for markets and post-trade services at the Stock Exchange of Thailand.
       "The SET supports algorithmic trading, as increasing liquidity is important to us. There is much potential for us to grow in using algorithmic trading," Mrs Sopawadee said.
       "In 2008, such programs on the Singapore Stock Exchange accounted for 15%of the total value of trades; for the Korea Stock Exchange, the figure was 13.5%,for the Tokyo Stock Exchange, it was 9.3%, and for us, it was just 0.7%."
       The SET began permitting algorithmic trading in 2006, and allows institutional investors to submit computer orders direct to broker trading systems through the direct market access system.
       Trading strategies such as VWAP (volume weighted average price), TWAP (time weighted average price), TEX, Float,Close and MOC are currently permitted.SET officials said they were open to facilitating other types of trading methods.
       Programme trading is common in developed Western markets and relies on computer models to calculate trading strategies including the timing, price and volume of different trades.
       Brook Teeter, director and head of Advanced Executive Services Sales for Asia Pacific at Credit Suisse (Hong Kong),said algorithmic trading is an efficient tool for traders as they lend themselves anonymity which has less of an impact on the market.
       Trades can be executed much faster than if human interaction is required,even while investors retain control over the overall strategy.
       Mr Teeter said algorithms, however,do not take into account market news,whether good or bad.
       "Human intervention is sometimes needed on highly volatile or widespread names," he told the Bangkok Post.Mr Teeter said 35% to 40% of Credit Suisse's trading flow in the Asia Pacific is executed through programme trading,considerably lower than the 65% to 70%seen in the US.
       "In Thailand, we have seen some very good results with our VWAP tactic as approved to us by the Stock Exchange of Thailand," he said.