United Securities Public Company Limited
Form 56-1
2.3 Business Characteristics of each Service
(1) Business Characteristics
The characteristics of each of the Company’s business are classified as follows:
Securities Broker Business
Market share values of the Company for the past 3 years from 2007 to 2009 are shown in the table below:
Table of Market Share Value
Securities Trading
Volume
SET (Million Baht)
US (Million Baht)
2007 2008 2009
4,271,
819
69,89
0
3,981,
230
59,71
8
4,428,
979
66,73
6
US Market share (%) 0.82% 0.75% 0.77%
New Account Opening Policy
It is the Company’s policy to welcome all types of customer both retail and institutional which consists of domestics as well as foreigners. At present, however, most of our customers are retail customers and the Company has set up the screening of new account opening policy according to the rules and regulations of the
SEC and the SET. In 2009, the Company’s rule regarding the practice of Know Your Customer and Customer Due Diligence
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United Securities Public Company Limited
Form 56-1
(KYC/CDD) were revised to be more prudent and be able to efficiently reduce the Company’s risks. In this regard, for the new account opening process for the customer wishing total trading line of more than 5 million Baht, which is considered significant, the investor contact, accompanied by Legal Officer or non-marketing staff, is requested to do face-to-face meeting with the customer in order to interview and verify the original documents for account opening. Also, the customer has to sign in presence of Legal Officer or nonmarketing staff. In addition, starting from 1 May 2009, for the existing customer of any type of account with trading line lower than 5 million
Baht and had never met face-to-face with the Company’s officer, and later wishes to increase their trading line to higher than 5 million Baht, the same way of face-to-face meeting is also compulsory.
Furthermore, the Company has set up additional practice for new internet account opening of customer not having reference person known by the Company. In this regard, such customer is requested to purchase stocks not exceeding the deposited cash
(Cash Balance) for at least 6 months to allow the Company to evaluate his or her ability to repay debt and trading behavior.
Subsequently, the customer will be able to trade via internet and the
Company shall determine the customer’s trading line by depositing collateral amounted 15% of each purchasing amount and settled within the due date(T+3).
Loan for Securities Trading Policy
Since 26 June, 2002, the Company has provided loan to customers in form of Credit Balance under Credit Balance Financing project. The amount of initial margin rate has been set up individually for each stock differently depending on the degree of risk in which will
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United Securities Public Company Limited
Form 56-1 be announced occasionally as appropriate. Followings are the process and the practice of granting Credit Balance to customers:
1. Marketing staff should know their customers in person so that they can evaluate the investment objectives, financial position or limitations as well as the basic investment knowledge of their customers clearly.
2. Determine appropriate maximum limit of credit line for each customer under a certain period of time considering from the ability to repay debt in which the trading line is determined aggregately from all types of accounts that a customer has with the Company.
3. Disclose the relationships between marketing staff and the customers or between the Company and the customers to notify the
Company’s compliance to the Code of Ethics like that of a professional company, and which is considered to be a provision in the Compliance manual to be strictly obeyed.
4. Approved authority of the credit line is dependant on the
Executive Board.
5. The marketing staff have to certify that the person who makes the buying and selling decision is the eligible person and not a nominee and that the payment should be settled by that particular person. The Company is therefore, forbidden to approve any credit line to the nominee of other persons intentionally or unintentionally.
6. In opening a securities trading account, the customers have to make deposit in cash first before trading can be made at the amount not less than the initial margin regulated by the Stock
Exchange of Thailand (at present it is 50%).
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United Securities Public Company Limited
Form 56-1
7. The Company is forbidden to approve for any margin on securities trading to the customers exceeding their purchasing limit during a certain period.
8. Purchases exceeding the purchasing limit can be allowed only if the customers increase their collaterals amount, either by cash or securities, to the amount not less than the initial margin of the exceeded volume purchased before purchasing can be done.
9. The Company has set up the marginable list of securities
(including those right offering shares of the listed companies), initial margin rate, maintenance margin rate and the minimum requirement rate for each securities in writing and informed related staff and customer at least once a month.
10. In case the customers’ equity falls below that of the
Maintenance Margin, written notice will be sent to inform them to fill in the collateral on the next working day so that the customers’ equity is not lower than the Maintenance Margin.
11. In case the equity of any customer has decreased to be equivalent to or lower than the Maintenance Margin, the Risk
Management Dept. is responsible in monitoring and informing the
Investor Contact to ask the customer to place more collaterals and to force sell on the next working day so that the equity of the customer rises to over the Maintenance Margin. On the settlement due date, if the equity of the customer is equal to or lower than the minimum requirement value again, the Risk Management Dept. has to force sell until the equity is higher than the Maintenance Margin. Moreover, the Risk management Dept. has to control the margin loan for any securities concentrated above 85% level of MAX X (the concentration level of securities set by the Company) by increasing the level of the former Maintenance Margin from which force selling is exercised at
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United Securities Public Company Limited
Form 56-1
25% to 30% for the customers’ account that has the stock values in
MAX X total from 80% of the aggregate stock values of the customers in order to be able to make faster force selling.
12. Interest on margin loan should be charged to the customers and the Company will also pay interest to the customers calculated on collaterals remaining in their margin loan account base on the daily outstanding amount under the agreed rate. The settlement of interest will be done by adjusting the margin level of each customer at least once a month.
13. Report on the outstanding balance and collaterals on margin loan account will be sent to inform the customers at least once a month.
Moreover, since the year 2009, the Company has determined the control criteria of concentration risk, which is the risk of the loan for securities trading concentrating on only a particular security. The
Company will increase maintenance margin rate of the customer depositing collateral with concentration of more than 80% of the concentration level set by the Company (Max X level) from 35% to
40% which requires the customer to deposit additional cash or asset in order to sustain the collateral’s value not to be lower than maintenance margin. In addition, the minimum requirement rate for force selling, has been changed from 25% to 30% for force selling in earlier stage, In this regard, the Risk Management Department informs the list of customer, who needs to deposit additional collateral and / or whose stock must be forced sold, to the head of Operations
Department to proceed and complete the process within the opening of stock market in the morning of next day. Moreover, the Risk
Management Committee has determined additional criteria for customer whose outstanding in account is concentrated stock of
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United Securities Public Company Limited
Form 56-1 more than 50% of the outstanding stocks that every month the
Company will charge additional 1% p.a. of interest rate previously calculated in the next month but not exceeding 15% p.a.
Securities Trading Credit Line Approval Policy
The Company has set up the securities trading credit line approval authority for new customers and the review of the credit line
(which already includes all types of accounts for each customer), the net settlement approval (per client), the changing of order (per transaction) and the transferring of error into the Company’s portfolio
(per transaction) by appointing the authorized signers as showed in
Table No. 1 which was reviewed and updated effective 9 July, 2007.
And updated the short sell approval line effective 7 August, 2007 as showed in Table No. 2 below :
In addition, in the year 2009, the Risk Management
Committee has determined criteria in decreasing securities trading line of account which has been checked by the regulators twice and three times in one month for 25% and 30%, respectively. For nonactive account within 3 years, the Company will annually decrease trading line for10% of the outstanding amount. For non-active account within 5 years, the Company will close the account, except for those which have outstanding stocks and interest, the trading line will be reduced to 1 Baht. In this regard, the Risk Management
Department will inform such customer list to the investor contact to consider and proceed according to the aforementioned criteria.
Furthermore, the Risk Management Committee has also set up criteria to determine the trading line of derivative account for the
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United Securities Public Company Limited
Form 56-1 customer who already has cash account and wishes to open derivative account without presenting financial evidence to the
Company by decreasing trading line in cash account and increasing line in derivative account in the ratio of 5 : 1. as the trading of derivatives is riskier than securities. Consequently, derivatives trading line is set lower. In this regard, the total trading line of all types of accounts must not exceed the total line calculated in accordance with what determined by the Company.
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United Securities Public Company Limited
Table 1
Form 56-1
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United Securities Public Company Limited
Form 56-1
Table 2 The Approval Line for Short Sell Transactions
Marketing staff should get approval for their customers’ short sell transactions from the authorized signers showed in the table below:
Position
Manager /
Assistant Vice President
Vice President /
Senior Vice President
Executive Vice
President /
First Executive Vice
President
Senior Executive Vice
President
Executive Director -
Thai Marketing /
Managing
Director not not exceeding
5 MN
10
MN





*
*


 not exceeding
15 MN
*
*
*

 not exceeding
20 MN
*
*
*
*
 exceeding
20 MN
*
*
*
Coapproval
Remark  means the transaction can be approved by the Department Head
* means the Department Head can only acknowledge but cannot approve the transaction
Settlement Control Policy
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United Securities Public Company Limited
Form 56-1
The Company has set up a strictly control policy over the customers’ settlement in order to comply with the rules and regulations of SET as follows:
Payment for securities purchased should be settled on time.
Late payment or cheque default cases will be followed up by the
Company’s investor contact in order to urge the customers to make payment either by cash or by depositing into the Company’s account and to warn them to be more careful in the future. Late payment or late submission of share certificates will subject to a fine. If the late payment of any customer happens 3 times in a year, then trading line of his or her account will be decreased for
50%. And if the late payment of any customer happens 4 times in a year, then the account will be considered for closing. The Risk
Management Department will be the one who proposes the default on settlement cases for prior approval by the Risk Management
Committee.
Securities Dealing
The Company runs Securities Dealing business and the
Executive Committee was assigned to establish a policy and control the Company’s investment. The Company has invested in securities for both equity and debt instruments of the securities listed in the Stock Exchange of Thailand, securities listed in the
Market for Alternative Investment (MAI), securities registered in the
Thai Bond Market Association (ThaiBMA) and non-registered securities such as the Bill of Exchange which was aval or guaranteed payment by commercial banks. However, due to the fluctuation of the stock market, economic situation and instability of
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United Securities Public Company Limited
Form 56-1 politics, the Company has carefully rationalized in its investment.
In addition, the Company has not focused in equity instruments since 2005. For the securities dealing of debt instruments, the
Company has expanded the volume of such business which has been a type of business that could earn more profits other than the main income from brokerage fees.
Unit Trust Selling Agent
The Company is a unit trust selling agent for 15 asset management companies in order to provide services for the investors who would like to invest in unit trust so that they could have various alternatives of such investment. Besides, this business could meet the investors’ requirements and be another channel of investment for the customers.
Investment Banking Business
In 2009, the Company provided accounting advisory service to A.P.F. Holdings Co., Ltd. under the name of “Project Accent” and received a fee of 3.30 million baht.
Financial Advisory Business
In 2009, the Company provided advisory service as an
Independent Advisor concerning the relaxation of tender offer of
Solartron Pcl. according to the company’s shareholders’ meeting resolution and received 500,000 Baht advisory fee.
Derivatives Business
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United Securities Public Company Limited
Form 56-1
In year 2009, the very first year of the Company’s to operate
Derivatives business starting from its license acquisition in late
2008, the Company had trading volume of over 10,000 contracts or approximately 40 contracts daily. Moreover, the Company has launched additional underlying asset which is Gold Futures in
February and has extended the underlying assets of more firms in
Single Stock Futures namely PTT, PTTEP, ADVANC, BANPU,
BAY, BBL, ITD, KBANK, KTB, LH, QH, SCB, SCC and TTA in mid
2009. Presently, the Company has full capacity to trade all types of underlying assets tradable in Thailand permitted by TFEX.
During the past year, the Company joined the Futures
Industry Club and the Association of Securities Companies to determine the initial margin calculation which is greatly beneficial to customers. In addition, it also has enhanced stability and speed of the online derivatives trading system via internet, from which the customers are able to trade derivatives, check real time price and monitor their own portfolios by themselves anytime and anywhere.
(2) Market Outlook and Competition
Thai Stock Market in 2009
Contrary to the deep-seated bearish sentiment in the preceding year, the year 2009 saw one of the strongest annual returns in Thai stock market history. SETI that recovered from its previous close at 449.96 to end the year at 734.54, or 63.2% per annum, resulted in a proportionate increase of total market capitalization from Bt3.6tr to Bt5.9tr.
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United Securities Public Company Limited
Form 56-1
The key reasons that helped the market make a comeback are summarized as follows:
1) Despite severe financial meltdown in the past couple of years, concerted fiscal and monetary stimulus actions by the government and central banks from all over the world successfully pulled the economy out of recession since
2H09.
2) Against the backdrop of anticipated quick recovery of the global economy, commodities prices saw broad-based rebound due to speculation known as “reflation trade”.
Crude oil prices, for instance, bounced back from $32 to retest $82 during the year. Broad-based rebound of other commodities prices resulted in earnings turnaround of commodities-related stocks that had posted sharp losses in 2008.
3) Continued weakening dollar helped attract fund flow o emerging markets. During the year, THB/USD was weakened from 36.31 to 33.
However, the market also saw certain negative factors that from time to time resulted in somewhat throwbacks being depicted in the chart shown below:
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United Securities Public Company Limited
Form 56-1
Nov 07-Jan 08 -- SETI moved in tandem with crude oil that hovered back and forth in the range of $90-100
14 Dec 07 -- Supreme Administration Court ruled against the petition to delist PTT
23 Dec 07 -- PPP won the general election
3 Apr 08 -- crude oil runaway above $100
19 Aug 07 -- Thai voters endorsed the draft 2007 constitution in its firstever referendum
Aug 07-Jan 08 -- wolrldwide credit crunch as subprime mortgage backed securities were discovered in portfolios of banks and hedge funds
25 Nov 08 -- PAD seized
Suvannaphum Int'l Air Port
26 Nov 08 -- SETI hit 08 market low at 380pt
2 Dec 08 -- Constitution
Court dissolved the three parties of Somchai govt
26 Aug 08 -- PAD protestors seized the
Government House
9 Sep 08 -- Constitution
3 Dec 08 -- PAD ended its 193-day marathon protest
15 Dec 08 --Abhisit was elected as PM
Court terminated
Samak's premiership
17 Sep 08 -- Somchai
18 Dec 08 -- crude oil hit
08 low at $35.98
22 May 08 -- SETI hit 08 market high at 884pt
25 May 08 -- PAD launched its 193-day mass rallies
11 Jul 08 -- crude oil hit its record high at
$147
22 Oct 09 -- crude oil retested $81.5/barrel
14 Oct 09 --inauspicious rumor about the King
12 Nov 09 --MSCI cut
Thailand's weighting
27 Nov 09 --Dubai World debt default
1 Oct 08 -- financial crisis spread to Europe
4 Oct 08 -- Chumlong was attested by police
7 Oct 08 -- police crackdown against protesters causing a hundred of deaths and injuries
"Renewed
Optimism"
30 Dec 09 --SETI ended at 734.54pt
"Fears of 'Douple-
Dipped' Recession"
30 Jun-10 Jul 09 -- crude oil fell sharply from $73 to
$58
"Reflation
Trade"
Rallies
11-15 Apr 09 -"Bloody Songkran"
(SET closed for public holidays)
3 Mar 09 -- SETI hit
09 mkt low at 409pt
Thai Stock Market Outlook in 2010
Thai Stock Market Outlook in 2010
We expect that the stock market in 2010 would likely remain bullish but quite volatile. This is attributable to a mixed combination of positive and negative factors as follows:
1) According to current consensus, most economists agree that the global economy has bottomed out and expect to see sustained recovery in 2010;
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United Securities Public Company Limited
Form 56-1
2) In view of sustained recovery down the road, this will eventually result in a more broad-based stock market rally;
3) Quality of corporate earnings is expected to improve in
2010. Bottom-line growth would be driven by top-line growth, not just from inventory gain as envisaged in 2009;
4) Governments in many countries have been in a heavy indebted position. So, they might not be able to sustain their fiscal stimulus for long;
5) Recovery might derail if the government failed to solve the problems of many projects in Map Ta Phut, that were stalled due to suspension order by Administrative Court, within a reasonable period. Also added to this is political problem of which investor’s confidence might be impacted should social unrest happen as in last Songkran.
Competition in Securities Business
Starting from 2010, securities companies in Thailand will enter the first phase of gradual liberalization according to SEC’s policy. Stock brokerage fee will be based on a sliding scale. Fee will be lower as trading volume increases and negotiable once trading volume reaches a certain level as follows:
Trading
Volume
(Bt m/day)
Offline
Trading (%) Cash
Online Trading (%)
Cash Balance/Credit
Balance
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United Securities Public Company Limited
Form 56-1
X  5
5  X  10
10  X  20
> 0.25~1
> 0.22~1
> 0.18~1
> 0.20~1
> 0.18~1
> 0.15~1
> 0.15~1
> 0.13~1
> 0.11~1
X  20 Negotiable and not exceeding 1%
From Jan 2012 onwards, stock brokerage fee will be freely negotiable and SEC will accept unlimited applications for new securities companies, providing that the applicants meet the requirements for each category of licenses being sought for.
SEC will replace current “multiple licenses” with “single license” that will allow license holders to engage in a full range of securities business. Applicants who see to engage in a specific category of securities business, e.g. debt, derivatives, and asset management, will be able to apply for “boutique services” license.
However, only full service providers are allowed to do stock broking license. License fee for full services and boutique services are set at Bt20m and Bt5m, respectively.
In view of the aforementioned, we expect that:
1) Competition among securities companies will become fiercer. In view of this, more merger and acquisition in the industry is expected.
2) More financial instruments with increasing varieties and complexity, e.g. futures, options, ETF, derivative warrants and so forth, would be available in the market thereby creating new opportunities for traders and new risk management tools for investors.
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United Securities Public Company Limited
Form 56-1
3) Starting from Jan 2012, SEC stipulates that providers of full services and boutique services must have a minimum paid-up capital of Bt500m and Bt100m, respectively.
However, many stock brokers still have paid-up capital less than the aforesaid levels. Ones with paid-up capital less than the threshold must either recapitalize or merge with others to meet this new rule.
Broker Ranking by Market Share in 2008-2009
2008
Rank Broker %
2009
Rank Broker % *
1
2
KIMENG
PHATRA
8.18
5.96
1
2
KIMENG
ASP
10.68
5.71
3
4
5
6
7
8
ASP
CS
ZMICO
BFITSEC
TNS
BLS
5.38
4.81
4.60
4.04
3
4
5
6
3.98
7
8
KTZ
PST
CGS
PHATRA
TNS
BLS
5.47
5.11
4.83
4.45
4.38
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United Securities Public Company Limited
Form 56-1
3.97 4.08
9 UBS 9 KGI
3.86 3.88
10 AYS 10 CS
11 KGI
3.81
3.75
11 AYS
3.36
3.29
12 SCBS 12 BFITSEC
13
14
15
PST
MACQ
CNS
3.64
3.17
2.85
2.67
13
14
15
UBS
CNS
TSC
2.99
2.84
2.60
2.54
16
17
18
TSC
JPM
CLSA
2.62
2.49
2.48
16
17
SCBS
KS
2.50
2.39
18 GLOBLEX
2.27
19
20
ACLS
CGS
2.36
2.31
19
20
MACQ
FSS
2.19
2.15
21
22
TRINITY
DBSV
2.23
21 DBSV
2.01
22 UOBKHST
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United Securities Public Company Limited
Form 56-1
2.14 2.00
23 FINANSA 23 AIRA
1.72 1.77
24 24 CLSA
25
UOBKHST
1.67
SICSEC
1.50
25 KKS
1.74
1.57
26 26 JPM
27
28
29
30
31
32
KS
AIRA
FES
GLOBLEX
1.40
KKS
1.43
1.31
SCIBS
1.47
1.43
KTZ
1.07
1.06
27
28
29
30
31
32
SICSEC
ACLS
TRINITY
SCIBS
FES
ZMICO
1.49
1.49
1.46
1.31
1.29
1.06
1.04
33 FSS
34
35
CIMBS
IVG
0.98
0.91
0.87
33 IVG
0.86
34 MERCHANT
0.82
35 FINANSA
0.79
36 MERCHANT 36 US
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United Securities Public Company Limited
Form 56-1
0.77 0.77
37 US 37 CIMBS
0.75 0.72
38 CIMB-GK
0.34
38 CIMB-GK
0.10
100.00 Total 100.00 Total
Stock
Exchange of Thailand
* From Nov 09, proprietary trading volume was excluded.
Competition in Investment Banking Business
Competition in the Investment Banking business and the securities underwriting business will become fiercer in the future as several securities companies especially medium to small companies start to focus more on these businesses. As such the
Company will be very selective in the areas where we offer our services and the clients which we service.
Regarding target customers, in order to continuously enhance the performance of securities trading business, the
Company focuses both on listed customers in the stock exchange and companies in general which want to mobilize funds from both equity and money market. We aim to win new underwriting deals and at the same time focus on customers who may need financial advisory services for other non-securities businesses such as financial restructuring and merger and acquisitions.
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United Securities Public Company Limited
Form 56-1
(3) Procurement of Products or Services
Sources of Fund
For the past 3 years the Company had engaged mostly in short term loan from local financial institution as well as the shareholders’ equity as the source of fund. The capital was utilized on investment in debt instrument and loan for securities trading and the rest was used as working capital. The loan from other financial institution, if any, would be short term. The sources of fund policy is to choose the source which is more suitable in relation to the business activities and its objectives and which will not affect the ratio between total liabilities and shareholders’ equity as well as the NCR ratio.
Securities Trading Loan Policy
In 2009, the Company had provided securities trading loan under the Credit Balance system. Towards year end, the total
Credit Balance line was 4,492.70 million baht with the total outstanding balance of 379 million baht. The Company exercises the greatest care when extending credit under the Credit Balance system.
The Maintenance of Net Capital Ratio
The Company will maintain its Net Capital Ratio (NCR) to be up to the Securities & Exchange Commission’s standard on a daily basis. The types of liquid assets and the liabilities of the
Company will be evaluated everyday in order to control the
Company’s NCR to be in line with the standard rate and in a timely
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United Securities Public Company Limited
Form 56-1 manner. The NCR as of FY2009 year end was 178.95% of general liabilities.
30