Thailand’s Securities and Exchange Commission (SEC) is consulting on draft rules to strengthen depositary receipt (DR) safeguards, restrict Thai exchange-traded funds’ (ETFs) investments in foreign leveraged and inverse ETFs, and tighten margin lending controls for those products. Foreign leveraged and inverse ETFs and crypto ETFs would be excluded as eligible DR underlying assets. Eligible underlying common shares would expand from companies in Greater Mekong Subregion countries to companies across ASEAN, subject to an average market capitalization of at least THB 75 billion over the preceding 15 consecutive business days.
DR issuers would need systems to verify underlying holdings before each issuance, ensure sufficient assets cover all DRs sold and not yet redeemed, and prevent those assets from being pledged, encumbered or otherwise used to obtain benefits. Reporting and document retention requirements would support compliance monitoring. Under the annual shelf model discussed in September’s consultation on DR application fees, qualifying issuers would receive approval for one year, aligned with their annual reporting cycle, without limits on offering numbers or value. Each offering would require a separate registration statement and draft prospectus, and application fees would be adjusted to the revised process.
Thai ETFs could invest in foreign leveraged and inverse ETFs only for portfolio management purposes, with investment details disclosed in their policies. Feeder funds and funds of funds could not adopt policies or strategies focused on those investments. Securities companies would have to set initial margin rates that reflect the products’ higher risks and leverage factors. They would also need controls against concentration at both customer and margin loan portfolio levels, alongside monitoring of debtor quality and concentration, to mitigate risks from market volatility and forced collateral sales.