The Bank of Thailand is expected to remove constraints to trading onshore digital options for fx and interest-rate products, which have been hindering the market's growth. Following lobbying efforts by international firms that are in regular dialogue with the BOT, derivative officials are hopeful the regulators will remove the constraints in the next few months. "Plain vanilla derivatives continue to attract interest, but rectifying this issue will be a plus," said a derivatives head at an international house in Bangkok. Officials at the BOT in Bangkok declined all comment.
The BOT enacted the regulations late last year, requiring onshore financial institutions selling digital options locally to hedge them on a back-to-back basis, due to concerns about risk-management systems at local banks. As a result, there has been a steep drop in digitals trading this year. "There's been quite a slowdown," said the head, adding, "This has limited the range of solutions we can offer to clients." He continued that structures such as range accruals, which have digital options embedded, had proved popular until the regulatory changes.
