HNX issues derivatives market rules
HNX issues derivatives market rules
The Ha Noi Stock Exchange has issued its membership regulations for derivative market trading, which is scheduled to start operation in the second quarter of this year.
Pursuant to Decree 42/2015/ND-CP, dated July 1, 2015—which lays out the legal framework for trading derivative securities in Viet Nam—there are four types of members, including trading member (securities companies), special trading member (commercial banks), market maker and clearing members.
Only Vietnamese entities can become trading members.
To become a trading member, securities firms must be licensed by the State Securities Commission with a certificate of satisfaction of conditions for derivatives brokerage, while a commercial bank must have the central bank’s approval on investment in derivatives and be a member of the Government bond market of the stock exchange in order to be a special trading member.
It must not be in the process of a consolidation, merger or dissolution, it must not be under control or special control of any Vietnamese authority; and its operation must not be subject to suspension or temporary suspension. A firm also must meet requirements of charter capital, owner equity and business results.
In order to be a market maker—who is entitled to create a market for one or more derivatives on the basis of a contract with the stock exchange—securities firms or commercial banks must satisfy clearing member conditions.
Clearing member can clear and settle transactions for their own account and for its brokerage clients.
In addition, members must satisfy the stock exchange’s requirements on IT infrastructure and professional rules for derivatives trading.
On March 24, the Ha Noi Stock Exchange issued regulations on membership of the derivatives market, with detailed requirements on IT infrastructure and application procedures.
According to the new rules, securities companies and commercial banks need to have their IT infrastructure connected to the stock exchange and ensure connection with the stock exchange’s derivatives trading system.
They also must install software to serve registration procedures, transactions, settlement. Securities firms must have websites to disclose derivatives trading as well as information of companies.
For entities whose membership is terminated by the stock exchange, the time needed to re-register is two years in case of voluntary termination and three years in case of compulsory termination.
The regulation also stipulates rights and obligations of members. Securities firms have the right to receive the information provided under the contract signed with the stock exchange while banks can connect and perform transactions on the stock exchange’s trading system as well as use the services provided for special trading members.
Applicants to become market makers must test the function of listing prices and sign contracts with the stock exchange and register account for market makers.
In addition, the new regulations provide details on reporting regimes and disclosure requirements for each type of member, as well as settlement disputes and punishment for violations.
“With this regulation issue, legislation related to market members has been basically completed and ready to open its door for derivative market operation,” the northern stock exchange said in a statement.
After 16 years of operation, the domestic stock market has only stocks, bonds and fund certificates commonly traded. The establishment of derivatives market is expected to provide modern products for investors and boost the local market toward greater development.
