Kittiratt na Ranong faced his first leadership test as president of the Stock Exchange of Thailand last week when he came under an avalanche of criticism over the introduction of a new price-spread trading system.

But he insisted that he could not back away from what the SET had done to improve efficiency in stock-trading.

The new system got off on a bad start, and several retail investors charged that it had scared away investment from the stock market.

Under the new system, the minimum limit for share-price fluctuations was reduced from Bt0.10 for all shares to Bt0.01 for shares with prices below Bt2, to Bt0.02 for stocks priced between Bt2 and Bt5 and to Bt0.05 for shares priced between Bt5 and Bt10.

Last Monday, when the system was introduced, volume in the stock market plunged to its lowest level this year, shrinking to Bt1.06 billion.

There was a report that suggested Dr Somkid Jatusripitak, the deputy prime minister and finance minister, had reacted to the criticism by asking Kittiratt to review the new system.

He had received complaints from retail investors. However, after meeting his board on Thursday, Kittiratt came out and insisted that the SET would stay firm on the matter.

"The spread system is simply the first test case of our overall efforts to tackle capital-market development," he said. "I know some investors don't like it, but others also give us support. But we need to keep on course."

Efforts to implement the new trading-price spread system had been going on for quite some time. Vicharat Vichit-vadakarn, Kittiratt's predecessor, took up the issue. When he tried to introduce it, he received much criticism from investors.

Kittiratt inherited this measure from the previous management and went on to introduce it. There was a debate on two formulas for the trading of stocks with a par value of Bt10.

The first formula was that the spread of the bid/offer price should be Bt0.01 across the board. The second formula, which has now been adopted by the exchange, offers three steps. Of all the 27 brokers, only two voiced dissent from this new trading system. The SET board gave Kittiratt unanimous backing to go ahead and implement the new system.

The new price-spread system is designed to reduce fluctuation in stock trading as the par value of several listed companies had been slashed to Bt10 or below, compared to Bt100 in the past. This lower par value has increased the liquidity of some companies for stock-trading.

Yet without a change in the spreads between the bid and offer price, some small stocks were facing sharp fluctuations in their prices.

"Overall, the principle of the new system is sound, because our stock market is highly speculative," said Dr Prasarn Trairatvorakul, the secretary-general of the Securities and Exchange Commission. "For it would make it tough for investors to speculate in stocks with a par value below Bt10. Without the new system, a Bt1 stock, with a spread of Bt0.10, could see big jumps in price."

He added: "Some say the new system has reduced the liquidity of some stocks. Yet other stocks are seeing higher liquidity. So we need to keep a watch on how it turns out. We have asked the stock exchange to monitor development."

The real test for the new spreads may soon come as the exchange looks at how investors react to the trading of Internet Thailand (Inet) stocks, which make their debut on Wednesday. Their initial public offering price is Bt3.50, making it an ideal case to watch in determining whether the new system actually boosts liquidity in trading.

Siriporn Chanjindamanee, Thanong Khanthong