Digital Horizons: Shaping the Future of Capital Market

Digital Horizons: Shaping the Future of Capital Market

I would like to thank the Securities and Exchange Commission (SEC) for the honor of inviting me as a panelist at the Digital Infrastructure for Capital Market seminar, part of the SEC Digital Services event for the year 2024, held on October 18, 2024. I presented on the topic Digital Horizons: Shaping the Future of Capital Market in my capacity as an advisor to the Stock Exchange of Thailand.Today, I would like to share insights on digital infrastructure and its details, based on my work experience. Over the years, I have had the opportunity to participate in large-scale, industry-level projects across the capital markets, financial markets, and the banking sector. These include the transformation of the settlement system from T+3 to T+2, the eLetter of Guarantee project on Blockchain, the ICO of Destiny Token, the Standard QR code initiative under PromptPay, and most recently, the development of the national tourism platform, TAGTHAi.

Let me start with a question that was raised at the seminar:

Question: What does “digital infrastructure” (especially in capital markets) mean? What functions does it serve, and how does it benefit the development of capital markets?

To explain “infrastructure” in a way that’s easy to understand, it’s similar to building roads or bridges. When we build bridges, it makes travel and connections easier, or what we call easy access, which creates economic value and improves people’s quality of life.

Now, let’s look at the infrastructure in the capital markets. Consider the following figures:

• Equity market participants: 2.9 million people

• Digital Asset participants: 6.9 million people

• Mutual fund participants: 2.1 million people

• Insurance/Life insurance participants: 10 million people

• Bond market participants: only 220,000 people

When compared to financial products like credit cards, which have 8 million users, it becomes clear that there is still significant room to expand the user base for equity and bond markets.

As a citizen, some questions that come to mind are:

1. How can we increase the number of participants in the capital markets?

2. Why are there only 220,000 participants in the bond market? And why can’t bonds be traded as easily as equities?

3. Why can we buy certain equities with just 50 or 100 baht, but not blue-chip stocks like PTT or SCG in the Thai stock market?

4. Why is trading limited to business hours? Why can’t we have 24/7 trading?

Asking the right questions will open the door to development and collaboration among various stakeholders in ths industry. Solving these issues cannot be done by one organization or company alone; it requires industry-wide cooperation. Digital infrastructure provides the following benefits:

• Financial Inclusion: Capital markets offer more diverse saving options. Today, we have digital services like eKYC and settlement processes that are more accessible. Moreover, there is an upcoming eKYC service for corporate entities called TrustBiz Connect, which will enable digital legal transactions with entities without paper documentation. This service will be paired with eBank Confirm, allowing banks to send statements — such as deposits, loans, and derivative obligations — directly to auditors with the corporate entity’s consent via TrustBiz Connect. This full loop will be launched by the end of the year through the collaboration of banks, the SEC, and the Federation of Accounting Professions.

• Efficiency: Enhancing end-to-end operational efficiency and reducing complex, spaghetti-like connections that are difficult to manage and costly.

• Transparency: Standardized, machine-readable, and open data improves access, auditing, and transparency in transactions.

Question: What are the challenges in developing digital infrastructure, and how should regulatory bodies like the SEC or other related agencies provide support?

There are several key success factors in building digital infrastructure:

1. Right Product/Right Service: Defining the correct problem and finding solutions that benefit the industry and society in the long term is crucial for driving progress. For example, developing the bond market or uplifting equity trading.

2. Right Ecosystem: Having stakeholders who understand the problem and believe in solving it together ensures mutual benefits in the long term. I emphasize the long term here.

3. Right Capability: While there are numerous technologies available today, the key is to first design the business architecture and then select the technology that best fits that architecture.

4. Right Support and Governance: A structured decision-making process and support from relevant entities — both the capital market regulators and government agencies — are essential to facilitating these changes.

Question: Suggestions for regulatory bodies and stakeholders:

One of the key roles of regulatory bodies is to create an environment that fosters innovation. A proper regulatory sandbox is crucial for testing and development. Without such a testing environment, we may be confined by old frameworks and unable to make significant progress.

As for all stakeholders, it’s natural that some will gain and others will lose in the short term, which can pose obstacles to development. However, we must view this as an opportunity to make the overall pie bigger, leading to long-term economic growth.

Lastly, I would like to emphasize that we, as business operators, should focus on medium- and long-term goals. In the short term, there will always be winners and losers. If we focus only on short-term results, there will be no real change or development, and we will remain stagnant — secretly envying our neighboring countries. Therefore, the most important question is: Have each of us done our part to the best of our ability?

Thank you.