On August 10th, the derivatives market will be officially launched. This is an important event of the Vietnamese stock market, marking a new development phase of the Vietnamese stock market in the process of perfecting the structure of the stock market and the financial market of Vietnam. Along with the development of the stock market, the requirement in developing new investment tools such as derivatives securities has become a practical necessity, the next step to perfect the financial market structure, including the capital mobilization market and the risk-spreading market. The launch of Derivatives market is to complete the stock market and financial market in Vietnam, helping to improve the investor base and attract more foreign investors, especially institutional investors, therefore, to promote liquidity in the underlying market.

Up to now, legal regulations, trading system, clearing payment have been completed to ensure smooth and safe operation of the market. Seven securities companies have been approved to become members of the Derivatives market of Hanoi Stock Exchange and connect with the derivatives trading system of Hanoi Stock Exchange including: VPBank Securities, Ho Chi Minh City Securities Corporation, Saigon Securities Inc., Vietnam Bank for Investment and Development Securities, VNDirect Securities Joint Stock Company, Viet Capital Securities JSC, MB Securities JSC. Investors can open derivativestrading accounts at those 07 securities companies. The first derivatives product on the market is the VN30Index Futures Contract. Vietnam will be the fifth country to have derivatives markets in the ASEAN region besides Singapore, Malaysia, Indonesia and Thailand and the 42nd country in the world with this high-end financial market.


PREPARATION FOR THE DERIVATIVES MARKET

Complete the legal system on the derivatives market

·         Decree 42/2015 / ND-CP

·         Circular 11 / TT-BTC and Circular 23 / TT-BTC

·         Announcement No. 448 / TB-BTC assigning the Hanoi Stock Exchange and the Vietnam Securities Depository to organize trading and settlement activities of the derivatives market

·         Decision 433 / QĐ-UBCK to select Vietinbank as settlement bank

·         Guideline No. 6190 on Accounting Regime for Derivatives

·         Regulation and procedures of HNX: 2 regulations (Regulation on member and Regulation on trading) and 6 procedures have been issued;

·         VSD’s regulations: 3 regulations have been issued;

·         Minutes of HNX-VSD coordination; VSD and Vietinbank: signed;

·         VietinBank has signed a cooperation contract and cooperation process with 7 members (VDS, HSC, SSI, VPBS, BSC, VCSC, MBS). To date, legal frameworks and procedures have been promulgated to ensure the listing, trading, clearing and settlement of derivative securities to ensure that the market can operate in a public transparent and safety manner.

1.     System Development

·         HNX, VSD and VietinBank have been testing many times with affiliates; so far the total approval test has been completed.

·         Currently, HNX, VSD and VietinBank have cleaned up the system, setting parameters ready for the go-live time on August 10th.

·         From August 1st, the clearing members have been able to make declaration on the customer's account, perform the deposit, withdrawal, deposit and clearing fund.


3. Products on the Derivatives stock market

According to the guidance of the Ministry of Finance and the SSC, the first product launched is the VN30Index Futures.

Some key points:

·         Trading time: Open from 8h45 (opening 15 minutes before opening time of underlying market and closing at the same time as the underlying market) Structure of 3 sessions: ATO- Continuous order matching - ATC

·         Four month contract listed at the same time: current month, next month, 2 end months of the next 2 quarters

·         Multiplier: 100,000 VND

·         Tick size: 0.1 index point

·         Trading collar: 7%

·         Final Trading Day: The third Thursday of the expiry month

·         Final settlementday: The workingday immediately after the final trading day

·         Payment method: in cash

Detailed sample of VN30 index Futures

No.

Provisions

Descriptions

1

Contract name

VN30 index future

2

Contract code

 According to regulations on trading code of HNX, for example: VN30F1709

3

Underlying asset

VN30 index

4

Contract size

VND 100,000 × VN30 Index point

5

Multiplier

VND 100,000

6

Expiry month

Current month, next month, 2 end months of the next 2 quarters.

For example: current month is July. Expiry months are July, August, September and December.

7

Trading time

Open 15 minutes prior to the underlying market

Close at the same time as the underlying market

8

Trading method

Matching and Negotiation

9

Trading unit

01 contract

10

Reference price

Daily settlement price of the previous trading day or theoretical price

11

Trading collar

7%

12

Tick size

0.1 index point

13

Order limit

500 contracts per order

14

Listing date

August 10th, 2017

15

Final trading day

The third Thursday of the expiry month. In case it is a holiday, it will be the previous trading day

16

Final settlement day

The working day immediately after the final trading day

17

Settlement method

Cash settlement

18

Daily settlement price

Regulated by VSD

19

Final settlement price

Underlying index value on the final trading day of futures contract

20

Position limit

Regulated by VSD

21

Margin requirement

Regulated by VSD

22

Trading fee

Not applicable

 

The HNX30 index futures will be launched after being approved by the Ministry of Finance and SSC.

For Bond futures, the Ministry of Finance has issued theAnnouncement No.492 / TB-BTC  to approve the underlying assets and allow the trading of  bond futures after the VN30 index futures contract is traded on the market.


4. Developing a Derivatives Market Member System:

·         HNX and VSD recorded positive participation of 8 securities companies: SSI, VND, VPBS, BSC, HSC, VCSC, MBS, VCBS; Reports on test results of 08 units have been sent to the State Securities Commission as a basis for granting derivatives licenses to these units;

·         Trading Members and ClearingMembers: From the end of May to the end of July, 2017, HNX has approved membership for 7 member securities companies. Up to now, all 7 Securities companies of trading and clearing are ready.

·         VietinBank has completed the opening of two accounts for derivatives clearing fund and  clearing and settlement for VSD, and has opened 21 accounts for 7 clearing members under VSD’s nameto be prepared for  market deployment.


5. Communication training

·         HNX, VSD and Vietinbank actively implemented communication and training programs for securities companies and investors;

·         Collaborate with the SRTC and the newspapers and media to conduct training on derivatives over the past two years in the form of television lectures, interviews, articles;

·         HNX and VSD organized professional training programs for related officers of the securities companies participating in the first phase and organized training for 27 trading representatives of eight securities companies. With the complexity of this market, HNX expects to continue supporting its members even after the market has come into operation.

·         VietinBank has held on-the-job training sessions for its head office at its Head Office and 155 branches nationwide.

·         About practitioner training: According to the SRTC, more than 1,000 individuals have attended SRTC training courses on derivatives;

·         HNX has coordinated with securities companies to implement training programs for investors of securities companies, focusing on supporting member units to actively participate in the first phase;

·         HNX coordinated with SSI Securities to hold two trial sessions for journalists who received positive feedback from journalists.

·         HNX has completed online training materials and uploaded to the HNX website for distribution to the public HNX also promotes propaganda about derivatives on Facebook HNX.