Thailand has been developing its capital market after the Asian financial Crisis, ti has a mature equity and bond trading environment. The 540 listed companies have a market capitalisation of around $300 billion. Recent developments by the local futures exchange has made room for new Baht VS USD contracts.
The Thailand Futures Exchange under The Stock Exchange of Thailand group, will launch USD futures on June 5, enabling Thai investors and business operators to manage Thai baht through the derivatives market, enhancing long-term benefits for the country and all players concerned.
TFEX and 31 member companies got approval last week from the Ministry of Finance to conduct currency-related transactions, and are ready to launch USD futures on June 5. This product will enhance trading opportunity and help managing foreign exchange rate risk, said TFEX Managing Director Kesara Manchusree.
“This is the first time that Thai nationality and residents are able to trade currency futures without FX underlying thanks to the approval of Finance Ministry, Bank of Thailand, and Securities and Exchange Commission.
It is also the opportunity for investors and business operators to use this financial tool to manage foreign exchanges more freely which will be useful in preparing the country for liberalization of the financial and real sectors,” Kesara said.
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Initially, investors must be Thai nationality or resident in Thailand and the market has yet to open for non-residents. The trading hours will be the same as other key derivatives products, which are morning session (09:45 a.m.-12:30 p.m.) and afternoon session (2:30-4:55 p.m).
TFEX Gold is currently trading at Baht 23,564.
USD Futures have four maturities, which are three nearest consecutive months plus the next quarterly months. Given the June launch, the contract months will be June, July, August, and September. One USD Futures contract values USD 1,000.
The contract is cash-settled, so there is no physical USD dollar delivered on the expiration date. Investors who are Thai residents have to open trading account with those 31 brokers or use the existing TFEX trading account if they already have one. Initial margin is less than two percent of the contract value, or about THB 500 per contract.
The commission is about THB 11 per contract. For details, investors should contact TFEX full-member brokers.
India introduced currency futures in 2008, it has daily trade volume of around $8-10 billion.