A derivative is a generic term for specific types of investments whose values are derived from the value of their underlying assets such as commodities, shares or bonds, interest rates, exchange rates, or indices. Derivatives that can be traded in the future are contract agreements between two parties settled today. The contract will establish an amount and date of maturity so that the two parties can trade at the agreed amount on the date of expiration.

Since the underlying asset already exists, it may be delivery on the expiration date like agriculture products. However, in case of the underlying assets are market indices, interest rates, or foreign exchange rates, which the physical delivery of the underlying asset is virtually never taken, the two parties will simply settle up with cash for the difference on the expiration date.

The important difference between derivatives and other securities is that derivatives have an expiration date and also the holders must exercise in according to the right and obligation stated in the agreement.

1. Derivatives itself has no value but its value is determined by the fluctuations in the value of its underlying asset.

2. Derivatives have a limited lifetime and will expire on the date of maturity.

3. Derivatives are contracts that give the holder the right and the obligation to buy or sell. In the case of stocks, there are no obligations force the holders to sell the stocks and there is no date of maturity for stocks.

4. Derivatives can create leverage which means that a small amount of investment could lead to a magnified profit or loss.

There are many types of derivatives but firstly traded in the TFEX (Thailand Futures Exchange) are futures and options.

Futures are contracts where two parties are obligated to buy/sell the underlying asset on the date of maturity according to the settled agreement.

Options are similar to futures but instead one party has the choice of whether or not to buy/sell at the date of maturity.

Generally, Futures and Options traded on the TFEX will have the following underlying assets:

• Stocks and market sectors
• Interest rates
• Exchange rates
• Gold, crude oil or other financial instruments

SET50 Index Futures

SET50 Index Futures is the first type of derivative that is traded in TFEX. The underlying asset is the SET50 Index, which is comprised of 50 listed companies selected by the Stock Exchange of Thailand.

SET50 Index Futures are contract agreements that allow the buyer and seller to buy/sell the underlying asset, SET50 Index, at a certain price in the future for instance, 3 months, 6 months, etc. Since the underlying asset of SET50 Index Futures is financial index, investors cannot make the actual delivery. Instead, investors have to settle their transactions by converting their profit and loss according to the difference on the expiration date or closing position date.

The expiration of SET50 Index Futures is ending in each quarter of a year, March, June, September, and December. Currently, there are 4 contracts trading on the TFEX expiring in each quarter. The last trading is set up by following the standards below:

The Final Trading Date: The final trading date is scheduled on the business day immediately preceding the last business day of the contract month. Trades will be final by 16.30pm on that day.

Example: SET50 Index Futures that expires in June

Remark: On the last trading day of each, a new contract ending on the same of next year will be issued and started trading.

In term of Futures trading symbol, “ S50” will be represented SET50 Index and followed by one character, based on other international markets, represented the month of expiration.

Character used to represent each month

The complete Futures trading symbol looks like the following:

Symbol of SET Index Options conducted from:

• Underlying Asset     The underlying asset is Set50 Index
• Expiration Month     The delivery months, including March, June, September,
                                  and December
• Call or Put options   Types of options holding.
• Strike Price               The price at which holder can exercise his/her right.

From the example above, S50M07C500 is equivalent to SET50 Call Option expired in June 2007 with exercise price equals to 500 points. The first 6 abbreviated characters are similar to SET50 Futures, however for SET50 Options, the type of options and the strike price are being added at the end.

SET50 Index Futures Contract Specifications

SET50 Index Options Conducted Specification

1. SET50 Index Futures

2. SET50 Index Options

2.1) Trading commission per contract

2.2) Commission for other services

1. For investors who would like to open a Derivatives Trading account, please fill out the application form on our website and send it to the company. Please Click here to print out the form. For any inconvenience, please contact Derivatives Center at 0-2695-5558 or sent an email to

• derivativescenter@seamico.co.th For investors who want to open a Traditional Derivatives Trading Account, sending orders via marketing officers.
• futuresonline@seamico.co.th For investors who want to open an Internet Derivatives Trading Account, trading online.

2. Within 7 working days of the receipt of your application and all documents, we will send you your Account Number by post to the address given in the application.

3. Once you receive your account number, please transfer an initial deposit to your account to Seamico's Bank Account in order to enable you to start trading.

4. For customers who already have a derivative trading account with the company and would like to start trading, please Click here

The procedure of placing Initial Margin (IM) for SET50 Index Futures and SET50 Index Options are:

1) Local Clients
Local clients are required to place margin not less than the initial margin requirement (plus commission and VAT) before opening position.

2) Institutional Clients
Institutional clients must place margin not less than the initial margin within 1 hour before closing of day T+1. The initial margin level will be calculated from number of opening contracts. For institutional client’s margin guidance, consider the following:

• In case that the institutional client has opened and closed his positions within the same day, day T, the client will not be required to place any margin in day T+1. However, the client must pay the different when any loss has occurred (commission and VAT included).
  
  
• In case that the institutional client has opened position on day T and close position in day T+1 (different date), the client still has responsibility to place margin (including commission and VAT) as required by the Initial Margin Requirement  of day T+1. The payment meant for the different between the two days is not acceptable.

1. Margin Require for SET50 Index Futures

2. Margin Require for SET50 Index Options

The margin requirements for SET50 Index Options are follows:

A) In case of long SET50 Index Options, clients must hold Excess Equity (EE) not less than the premium before executing such order that will decrease the client’s Initial Margin and/or close the holding positions.

B) In case of short SET50 Index Options, local clients and institutional clients must have Excess Equity as follows:

(1) Local Clients
By accepting the “Margin Calculation by Derivatives Class,” the rates of risk margin per contract for options are as follows:

(2) Institutional Clients
May choose among “Margin Calculation for Portfolio” or “Margin Calculation by Derivatives Class”

Margin Require = Max (A, B) + Premium

• Margin Calculation for Portfolio

- Initial Margin (IM) equals to 1.35 times of the sum between margin calculated by using the TCH risk array, and the premium margin.

- Maintenance Margin (MM) equals the sum between margin calculated by using the TCH risk array, and the premium margin.

*Out of the Money Value can be calculated using the different of exercise price and the underlying asset’s price multiply by the multiplier.

For SET50 Index Call Options = Max (Exercise price – SET50 Index, 0) * 200 Baht
For SET50 Index Put Options = Max (SET50 Index- Exercise price, 0) * 200 Baht

Strategic Short Options

In the case of holding a spread, either Bull Call Spread or Bear Put Spread and the expiration date of long option is no less than of those short options,   
Margin Requirement = 0

In the case of holding spread, either Bull Call Spread or Bear Put Spread and the expiration date of long option is no less than of those short options,  
Margin Requirement = A difference of the strike price

In the case of selling Straddle or Strangle, in which both Call and Put Options have the same expiration date,
Margin Requirement = Max (Call Outright Margin, Put Outright Margin + Mark-to-market Options Premium)

In the case of long Futures along with short Call Options or short Futures along with short Put Option and the expiration date of the Futures is no less than of those Options,
Margin Requirement = Futures Outright Margin + Mark to Market Options Premium

Mark to market calculation for SET50 Index Futures and SET50 Index Options:

For daily settlement process, mark to market price along with the client’s profit/loss will be use to adjust the client’s margin at lest at the end of every trading day.

Before any execution, the company will take a step to recheck the level of client’s excess equity. Also, while the execution is in queuing and the excess equity has decreased, the company will do as follows:

1. If the order could not match at the end of the day, the order must be cancel.
   
   
2. If the order is matched and the client’s mark to market margin has fallen below the maintenance margin requirement, the call margin procedure must be taken.

Upon the above cases, suppose the client has been using “Good Till Date” or ”Cancel,” and  he wants the “Good Till Date” or ”Cancel” order to proceed in the following business day, the company will recheck whether the client’s margin is adequate to allow for such action.

For institutional clients, the company will follow the same steps taken for local clients, except the company may look at the credit line rather than the clients’ margin.

Remark: Additional margin procedure can be view here

Fund Transfer

1.To transfer an initial margin to your account, you are advised to transfer funds via one of the banks as listed below:

After remittance, you are required to notify the company of your fund transfer by faxing a copy of the deposit slip (Pay-In-Slip) specifying your name, last name along with your Derivatives Trading account number and contact number to Operation Service Department at (66) 0-2631-1704.

If you are not in Thailand , you are advised to download and print Cash Deposit Form . Fill in the form and submit it to your bank for further process.

Remark: Please note that bank charges are applied when remitting funds electronically. Those charges may be deducted by the receiving bank in Thailand .

2. Automatic Transfer System (ATS) for Initial Margin

• For equity trading clients who have already signed the “ Letter of Consent for Debit to the Bank Account ”, you are advised to indicate your intention for this account as well by filling out Cash Deposit Form and send it to Derivatives Center . Please click here to print out the form.
  
  
• For clients, who have not yet applied for this service, can do so by following below procedures.
  

  2.1 Click here to download and print out the letter of consent for debit to the bank account ( ATS ) . Fill out the form and sign where required using the same signature as you did when opening your bank account.
  
  2.2 A copy of your ID card signed your signature as true copy
  
  2.3 A copy of the front page of your bank book showing your name and bank account number signed your signature as true copy
  
  Please send all above documents to the following address:-
  
    Derivatives Center
     Seamico Securities Plc,
     287 Liberty Square Building, 8 th Floor,
     Silom Road , Bangrak, Bangkok 10500
  
  2.4 After the letter of consent for debit to the bank account being approved by your bank, the company will inform you via e-mail. (The process usually takes approximately 3-4 weeks upon receipt of all documents).

Buying Limit Adjustment Period for Futures Trading

The company will adjust your Buying Limit after being informed of the deposit by clients. The period for Buying Limit Adjustment is as follows.

Note:

• The above will not apply for deposits to Kasikorn Bank via ATM machines. In such case, buying limits will be updated in accordance with the notification time from Kasikorn Bank
  .
• Please note that the above update time may not apply for overseas remittances . The update time will be depended on the notification time from your oversea bank.

If your "Buying Limit" has not been updated, please contact Ms. Rachanee at (66) 2695-5505 or (66)0-2695-5527 or send an email to futuresonline@seamico.co.th

Automatic Transfer System (ATS)

The company would like to introduce an alternative way for investors in order to transfer fund for Initial Margin Requirement or Margin Call Requirement.

The service is to debit money from clients' bank accounts for Initial Margin payment and also for additional margin settlement ( Margin Call ) when the initial margin is lower than the Maintenance Margin level.

TERMS AND CONDITIONS

1. For existing equity clients who have already applied ATS service for Securities Settlement can use this service for Initial Margin payment only. For those who would like to use the service for Margin Call payment, must fill out the letter of consent for debit to the bank account for Margin Call and send it back to the company along with a copy of the front page of your bank book indicating your name and account number and also sign on the document to certify it as true copy.
   
   
2. For clients who have not yet applied for any ATS services can do so by following the below procedures.
   
   •  Click here to download and print out the letter of consent for debit to the bank account with ATS for Initial Margin and the letter of consent for debit to the bank account with ATS for Margin Call .

•  Fill out both forms and sign. Please also attach the following copies.
   - A copy of ID card certified by your signature.
   - A copy of Bank Account with your name and account number certified with your signature.

Please send all documents to:-

Rachanee Sorahong
Derivatives Center
Seamico Securities Plc,
287 Liberty Square , the 8 th Floor,
Silom Road , Bangrak, Bangkok 10500

Clients will be informed immediately via e-mail when both letters of consent for debit to the bank account being approved by your banks (The process usually takes approximately 3-4 weeks upon receipt of all documents).

Remark:

• The company reserves the right to change the above interest rate with respect to possible future interest rate announcement from Thai commercial banks.
  
• The company will pay interest on a semi-annual (on 1st January & 1st July) by crediting such the interest amount directly to your TFEX trading account. In case the payment date is a public holiday, we will credit interest to your account on the next working day.

1. Pre-trade Session

• Cannot send orders: Type = Limit, Validity = FOK
• Cannot send orders: Type = Market (MP)
• When sending “Stop Limit Order,” Validity FAK and FOK cannot be used.
• When sending “Stop Limit Order,” Public Order can also be sent.
• Stop Order function cannot be sent with MP.
• When sending “Stop Order,” FAK and FOK cannot be used.
• Show QTY order cannot be sent along with validity FAK and FOK.
• Show QTY order cannot be sent with MP.
• Cannot send order of more than 100 contracts.

2. Trade Session

• When sending MP order, only FAK and FOK can be put in the validity box.
• To view “Show Qty” or “Public Order”, FAK, FOK and MP cannot be used.
• When sending “Stop Limit Order,” Validity FAK and FOK cannot be used.
• When sending “Stop Order” (MP), Public order cannot be viewed.
• When sending “Stop Order” (MP), FAK, FOK and MP cannot be used.
• Cannot send order of more than 100 contracts.
• When sending orders, the bid and offer prices can only be different from the current bid and offer prices by ±5% of the SET50 index closing price on the prior working day. 

•  Seamico Easy Guide to SET50 Index Futures
  
• จะเทรด FUTURE ให้ได้ดี ต้องเตรียมพร้อม

More information, link to TFEX Website

Telephone: (66) 0 2695 5558
Fax: (66) 0 2695 5599
Email: derivativescenter@seamico.co.th