Securities firms with smaller capitalisation dominate derivatives broking activities

After two years of operation, smaller securities firms in terms of market capitalisation have beaten big players in derivatives brokerage market share.

In the early stages of the derivatives market, which was launched on August 10, 2017, SSI Securities Corp (SSI) held the biggest market share of 28.28 per cent. It was followed by six other brokerage firms.

As of the end of 2018, three more had joined the market. VNDirect Securities Corp (VNDS) had the biggest share of 23.92 per cent, followed by HCM City Securities Corp (HSC), MB Securities (MBS), SSI and VPBank Securities (VPS) with 22.4 per cent, 16.57 per cent, 14.53 per cent and 13.61 per cent, respectively.

At the end of the first quarter of 2019, VPS topped the derivatives brokerage market share with a holding of 37.50 per cent. Following were VNDS (15.16 per cent), HSC (13.79 per cent) and MBS (12.84 per cent).

At the end of the period from January to March, SSI fell to fifth position with a derivative brokerage market share of 9.87 per cent.

On June 30, VPS continued leading the derivatives market in terms of brokerage market share, holding 51.82 per cent of the market. It extended the gap with other firms such as VNDS (12.57 per cent), MBS (10.65 per cent), HSC (7.29 per cent) and SSI (6.8 per cent).

It is obvious that HSC and SSI – the two largest securities firms in terms of market capitalisation – have lost their market shares to smaller firms.

It is believed that leading securities firms in the derivatives market have won over customers by offering free or lower trading fees to their clients.

To carry out a derivatives transaction, a customer must bear a number of fees such as a services fee, which is paid to the stock exchange, and overnight position management fee and collateral management fee, which are paid to the Vietnam Securities Depository.

Therefore, any securities firms that provide low or free trading fees for investors will lure the attention of those investors especially when a majority of derivatives investors are individual.

According to the Ha Noi Stock Exchange, 91.35 per cent of total traded contracts in June (1.96 million contracts) belonged to individual investors.

According to Bui Van Huy, HSC director of market strategy department, brokerages seem to gain market shares thanks to their assistance in trading fees, thus increasing the market’s trading liquidity.

Investors may save a lot of expenses if they do a lot of trading. But expense is only a short-term factor as other securities firms can win over customers with their advanced technologies and high-quality services and products.

It is important for individual investors to save on trading expenses, according to Vu Duc Long, VPS director of investment consultancy department. But in the long term, securities firms will have to improve the quality of facilities and technologies to meet investors’ demand rather than depending too much on fee cuts.

After two years, more than 36 million futures contracts have been traded on the Vietnamese derivatives market. In the first seven months of 2019, the average trading volume of the VN30-Index futures was 100,000 contracts in each session. The figure was 1.27 times the number made in 2018 and 10 times the number recorded in August-December 2017.

There are now seven futures on the derivatives market, including four VN30-Index futures and three government bond futures. The government bond futures were launched on July 4, 2019. After more than one month of trading, more than 100 government bond futures contracts have been traded.

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