REGULATIONS OF THE STOCK EXCHANGE OF THAILAND. Re: Short Selling in the Exchange, 2001

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1 (Bor.Sor./Khor ) REGULATIONS OF THE STOCK EXCHANGE OF THAILAND Re: Short Selling in the Exchange, 2001 This is for the purpose of improving overall securities trading by providing investors with more channels of investment and alternatives in risk management, while maintaining stable trading on the Stock Exchange. In order to comply with the Notification of the Securities and Exchange Commission No. Kor.Dor. 30/2540 Re: Securities Selling Whereby the Securities Company Does Not Yet Have the Securities in its Possession, the Stock Exchange of Thailand is required, with the approval of the Office of the Securities and Exchange Commission, to prescribe the rules regarding short selling. By virtue of the second paragraph (9) of Section 170 of the Securities and Exchange Act B.E (A.D.1992), the Board of Governors of the Stock Exchange of Thailand hereby issues the following Regulations: 1. These Regulations shall come into force on January 3, The Regulations of the Stock Exchange of Thailand Re: Rules, Conditions and Procedures for Short Selling (No.1), 1997 dated October 29, 1997 shall be repealed. 3. In these Regulations: Exchange means the Stock Exchange of Thailand; member means a member of the Exchange; securities means listed securities; * Short selling means (1) the sale of securities where the securities must be borrowed for delivery; or (2) the sale of securities by a participating dealer or market maker of the ETF for the company s account for the purpose of making profit from a price spread (arbitrage) or for the purpose of stabilizing liquidity, as the case may be, in accordance with the following basis: (a) the sale of the ETF investment units wherein the underlying securities of the ETF must be owned before the sale, with the value equivalent to the ETF investment units that are sold, and the ETF investment units must be purchased (created) from the management company on the same business day for the purpose of delivery; 107

2 (b) the sale of the underlying securities of the ETF wherein the ETF investment units must be owned before the sale, with the value equivalent to the underlying securities of the ETF that are sold, and the ETF investment units must be sold back (redeemed) to the management company on the same business day in order to obtain the underlying securities for delivery. trading system means the trading system under the Regulations of the Stock Exchange of Thailand Re: Rules Relating to Trading, Clearing and Settlement of Listed Securities. market maker means the market maker under the Notification of the Stock Exchange of Thailand Re: Trading by Market Makers. * ETF means the Exchange Traded Fund of which the investment units are listed securities in accordance with the regulations of the Exchange regarding the listing of investment units as listed securities. * Participating dealers means the persons with whom the management company enters into an agreement to sell and repurchase the ETF investment units according to the quantities or value as prescribed in a fund management scheme. * Management company means a management company in accordance with the regulations of the Exchange regarding the listing of investment units as listed securities. CHAPTER 1 Types of Security for Short Selling 4. A member may conduct a short sale only the securities specified by the Exchange. This is except in the case of a short sale by a market maker whereby short sales of the securities listed as that market maker's responsibility may also be made. CHAPTER 2 Procedures for Short Selling and Short Sale Reports *5. In a short sale, a member shall make an offer by means of recording it into the trading system for automated order matching (AOM) in accordance with the following basis: Short selling procedures (1) In the case of a short sale by a member, the member shall make an offer during the daily business hours, except for a period before the closure of the second trading session, which shall be indicated by the letter S. (2) In the case of a short sale by a member that is a participating dealer or market maker of the ETF investment units for the company s account, for the purpose of realizing a profit from a price spread (arbitrage), or for the purpose of stabilizing liquidity, as the case may be, an offer shall be made in the following periods and denoted by the letter K. 108

3 (a) the period before the opening of trading for the purpose of determining an opening price (pre-opening period); (b) the daily business hours. *6. A member may conduct a short sale only at a price that is not lower than the last trading price. Offering price in a short sale The provisions in the preceding paragraph shall not apply to a member who is a participating dealer or market maker of the ETF investment units, and is conducting a short sale in accordance with 5(2). 7. A member shall prepare a short sale record in accordance with the form prescribed by the Exchange and the record shall at all times be updated. 8. A member shall, at the end of each day in accordance with the form prescribed by the Exchange, submit a report on short positions which have not yet been covered; classified according to each individual security. *Other than the submission of a report under the first paragraph, the member that is a participating dealer or market maker of the ETF investment units, and is conducting a short sale in accordance with 5(2) shall submit a report on short positions in the form as prescribed by the Exchange at the end of every day. *8/1. The member that is a participating dealer or market maker of the ETF investment units shall procure a system for verifying the availability of securities with the value equivalent to the ETF investment units or the underlying securities of the ETF before the conduct of a short sale under 5(2). Procurement of a system for verification before the conduct of a short sale CHAPTER 3 Prohibiting Short Sale 9. The Exchange may prescribe the maximum volume of any security which can be sold short and has not yet been covered. If the short sale is more than the prescribed volume, the Exchange may prohibit short sales on the business day following the date the short sale is more than the prescribed volume, until such volumes are reduced. 10. The Exchange may temporarily prohibit the short sale of any security if the Exchange considers the continuance of short sales of such a security may cause risk or damage to securities trading conditions at the Exchange. 11. The Exchange may temporarily prohibit a member from short selling or order the member to purchase in return securities which have been sold short if the Exchange considers that such a member has any security under short sale which has not been purchased in return at such a high volume that may expose the company s financial condition and stability to risk. 109

4 12. Where a member violates or fails to comply with the provisions prescribed in these Regulations, the Exchange may prohibit such a member from conducting short sales. Transitional Provisions 13. All circulars of the Exchange relating to short selling in the Exchange, which have been effective prior to the effective date of these regulations, shall continue to be effective until new rules, conditions and procedures are issued for replacement. Notified on this 3rd day of January (Signed) Amaret Sila-on (Mr. Amaret Sila-on) Chairman of the Board The Stock Exchange of Thailand 110

5 Form Gor.Tor.4 The information as of Report on Short Positions Which Have Not Yet Been Covered.Company Limited Name of Securities Customer s Account Number of Shares Company s Account Total Not have short sale items which have not yet been covered. Prepared by: Tel:.. 111

6 Notes to Report of Preparing Report on Short Positions Which Have Not Yet Been Covered The company shall prepare a report of the head office and branch (if any) in accordance with the form prescribed by the Exchange every end of business day and made through the Members Supervision and Examination Department, The Stock Exchange of Thailand, by BRS (Broker Reporting System) within 8.00 p.m. of each business day. In case that has not short sale items which have not yet been covered, the company shall filed the report. The meaning of items The company shall report for short selling for both the company s account and its customers which classified according to each individual security after less number of shares of each securities which have been covered for both purchasing in return securities of own company and other company. ********************* 112

7 The information as of Record of Short Sale Items.Company Limited Name of Securities.. Shorten Name Short Sale Date Reference Number Details Amount Price Total Value Place of Lending Short Sale Customer Securities and Date of Lending Name/Surname Account Number 112/1