Form MO-PROG1: Form A

Transcription

1 Application for the Program Trading Software Form MO-PROG1: Form A Date To: President of The Stock Exchange of Thailand (SET)/ Managing Director of Thailand Futures Exchange (TFEX) We,,(hereinafter referred to as the "Company"), Member No., would like to implement the program trading software for trading by: the Company for (Proprietary trading, Investors port,market maker )_ Company s DMA customer: (please specify customer name and account) Internet trading customers :(General internet investors, Name of specified customer) The Company would like to apply for using the program trading software by Strategy with the Pre-trade Risk Management Control System for the additional strategy under the existing Pre-trade Risk Management Control System authorized by SET / TFEX, approval book no. by attaching the following documents: Risk Management Control (please fill in FORM B) Functionality of the program trading software (please fill in FORM C) The test results (Screen display) of the company's risk management control (all topics) Details of network and system between program trading and company's computer system (broker s diagram) User Manual Details of the risk management control system which the company used for program trading in other Exchanges (if available) update the program trading software in the area of Functionality of the program trading software Connectivity of Program trading software (acting user) from to be Risk Management Control authorized by SET / TFEX, approval book no., strategy name by attaching updated documents as follow: Risk Management Control (please fill in FORM B) Functionality of the program trading software (please fill in FORM C) The test results (Screen display) of the company's risk management control Details of network and system between program trading and company's computer system (broker s diagram) User Manual Details of the risk management control system which the company used for program trading in other Exchanges (if available) terminate the program trading software by attaching the Termination of the program trading software form (please fill in FORM D) Others (please specify):

2 The Company hereby warrants that the Company will comply with the term and condition that provided in this application and the order entry via such program trading operates with no conflict with, and complies with, the Rules and Regulations of SET or TFEX, and will not cause any damage to the trading system of the SET or TFEX. If this application becomes inaccurate, and/or the Company do not comply with the above term and condition, and/or the Company s trading through Program Trading without any approval by the Exchange or the program trading incurs any damage to SET or TFEX, the Company agrees to be responsible for all such damage incurred to SET or TFEX. In addition, the Company agrees that SET and/or TFEX may suspend the Company s trading through Program Trading as SET and/or TFEX deems appropriate. () Title Contact: Telephone Number:

3 Risk Management Control Form MO-PROG1: Form B We,, (hereinafter referred to as the "Company"), Member No., would like to describe the detail of Program Trading Risk Management Control as follow: Basic Risk Management Control Having pre-trade control to ensure that the orders are comply with the rules and regulations of SET or TFEX, such as the securities name, order type, volume, price and tick size Having parameter configuring control for both customers and traders including log keeping for inspection (Please describe) Reviewing the program trading parameter (at least once a year required) Keeping record for transactions and audit trail logs Educating on SET s rules and regulations, program trading user manual and procedure during crisis on a regular basis Having customer screening e.g. Credit limit control Customer disclaimer on liability from using program trading Having control and protection from program trading software error e.g. Control and protection from program error including; fat finger prevention (Please describe) Prevention system or method to reduce the impact of duplicated order e.g. alert, throttle control. (Please describe) Having risk control for the problem caused by Program Trading (System malfunction) by Broker s monitoring and broker s alert when the problem occurred Responsible Department How to handle the problem (Please describe) Having a kill switch function which can stop all processes and auto-cancel the unmatched order sent from program trading. Responsible Department How to handle the problem (Please describe) Having the manual regarding troubleshooting and crisis Others

4 Risk Management Control for Preventing False Market Types of securities applied Having order screening system or other systems to prevent order entry that may affect the market, or lead to false market or violate the laws. Such orders must be prevented in the client s ID level, not just the client s account level, such as Cash, Cash Balance or Credit Balance account. Prevention of orders pushing the price of securities. Maximum volume per order. Maximum value per order. Price Control. Volume Control. The continuity of the orders prevention. Prevention of orders entered and subsequently cancelled. Prevention of split orders. Prevention of wash sale orders Others Company hereby certify that the information mentioned above is true and correct. () Title

5 These examples of orders which may be considered as improper trading practices are just examples of the prevention of false market or orders which may lead to price manipulation. However, there are other factors which have to be taken into consideration, such as categories of securities and market conditions which may affect securities trading. 1. Orders pushing the price of securities : In order to prevent other investors from being misled that there is a significant change in price or volume of securities at a particular time. The continuity of the orders will be taken into account* in order to avoid the impact on securities' trading or overall market conditions, meanwhile, illiquid securities have to be considered as well. 1.1) Price control e.g. Bid/ offer prices should not be more than ± 3 5 spreads or ± 5% from the reference price (such as the prior closing price, last traded price). Meanwhile, securities with the price below 0.20 baht should not be placed the bid/ offer price of more than ± 1 spread, including MP orders. 1.2) Volume control e.g. Max order volume < 10 million shares and Max order value < million baht, the volume of an order should not be more than 10% - 20% of average daily volume in at least last 5 20 days, or should not sweep the entire best bid/ offer when placing a sell/ buy order. Volume-risk management depends on categories of securities (such as SET 50, SET 100 or mai) and liquidity of those securities. 2. Orders entered and subsequently cancelled : In order to avoid misleading volume of securities that there is a lot of demand for those securities at a particular time, or deceiving other market participants in order to buy or sell securities. For example, placing a bid/ offer order and then cancels, after that resending an order again within 1 minute after the previous order was cancelled, while that order is sent at the previous price and at a volume higher than or equivalent to 50% of the cancelled volume. 3. Split orders : For the purpose of preventing a large number of orders with the same securities and with the similar price and volume which are sent in the similar time. For instance, many orders which cause price changes should not be sent consecutively. There should be a lag of time before sending another order or there should be an alert/ staff to inspect such orders. 4. Matched orders (Wash sale) : To prevent an investors and/or a group of investors from being both the buyer and seller of securities in the same transaction in order to artificially increase trading volume of the securities. For example, there may be Reject/ Warning order if there is the order waiting for execution which was placed with the same security and price on the other side of the transaction, or there may be a random check after trades in case of Omnibus account. *The continuity of the orders is taken into consideration in order to prevent consecutively buying or selling of securities with multiple levels of price or panic sale. For instance, for the same security and same side of transaction, a client (all account IDs) should not be able to place orders waiting for activation for more than 2 orders, or there should be a time lag between each order of at least seconds.

6 Functionality of the program trading software Form MO-PROG1: Form C We,, (hereinafter referred to as the "Company"), Member No., would like to inform the functionality of program trading software as follow : Strategy Name Objectives get approval to be used in other Exchanges (please specify) Examples of functionality (Please describe in details e.g. picture, graph, numerical) Company hereby certify that the information mentioned above is true and correct. () Title

7 Termination of the program trading software Form MO-PROG1: Form D We,, (hereinafter referred to as the "Company"), Member No., would like to terminate of using program trading as follow: Terminate strategies authorized by SET / TFEX, approval book no. Terminate strategies under the existing Pre-trade Risk Management Control System authorized by SET / TFEX, approval book no. by Terminate all strategies Terminate some strategies Details No. Strategy name System Name Acting user Effective Date, onwards. Company hereby certify that the information mentioned above is true and correct. () Title