Debt securities can be traded through both primary market and secondary market. The details are as follows:
The primary market is the market where the debt securities are sold to the investors for the first time. The sales can be divided into 2 channels as follows:
1. Sales to retail investors
The purpose is to stimulate savings. Eligible buyers include individuals who are Thai nationals or residents, and non-profit institutions. The savings bonds are sold through selling agents appointed by the issuer, while the Bank of Thailand is responsible for supervising the sales, being a registrar and a paying agent for interest and principal.
2. Sales to institutional investors through auction
At present, government debt securities auctions are held by the Bank of Thailand in which bids are separated into 2 categories; competitive and non-competitive bids.
2.1 Competitive Bids:
Bidders submit their bids specifying yields and
required amount. Securities will be allotted first to the lowest yield (highest
price) bidder, and then successively to the next higher yield bidders until the
amount is not available.
2.2 Non-Competitive Bid
Participating institutions have to submit their bids through the primary dealers (designated by the Bank of Thailand) that are members of the e-Bidding system, and specify only the amount desired.
Successful bidders pay the price with the rate equivalent to the weighted average yield of accepted competitive bids. The Bank of Thailand announces the weighted average accepted yield along with the lowest and highest accepted yields via the BOT website and the e-Bidding system.
The secondary market means a market that provides for the purchase or sale of previously sold or bought securities taken place in the primary market. Seller in the secondary market is one who holds the securities and wishes to sell them. Trading in the secondary market can be done through the following channels:
Over the Counter (OTC) Unlike trades on the exchanges, buyers and sellers on the OTC market can negotiate directly with one another or via middlemen, called dealers, over computer networks or by phone. The trading price is thus dependent upon the negotiation between buyer and seller. At present, some financial institutions publish their bid and offer quotes on their own websites. Different financial institutions may provide different bid/offer quotes. In order to compare these quotes, therefore, buyers and sellers may need to contact several institutions. In addition, the yield curve may be used in assessing the securities prices.
Bond Electronic Exchange (BEX) is operated under the Stock Exchange of Thailand (SET). All debt securities including government and corporate debt securities, international financial institutions' debt securities, and debt securities issued under the Asian Bond Fund can be traded via the BEX. Investors wishing to trade debt securities via the BEX have to open securities account with member or brokerage companies. << Click for list of member or brokerage companies >> Trading occurs when investors place order through member or brokerage companies, who in turn, enter the order into BEX's trading platform and notify the result to the investor.