The Hanoi Stock Exchange (Source: vietstock.vn)Hanoi (VNA) - The Hanoi Stock Exchange has issued its membership regulationsfor derivative market trading, which is scheduled to start operation in thesecond quarter of this year.
Pursuantto Decree 42/2015/NĐ-CP, dated July 1, 2015--which lays out the legal frameworkfor trading derivative securities in Vietnam--there are four types of members,including trading member (securities companies), special trading member(commercial banks), market maker and clearing members.
OnlyVietnamese entities can become trading members.
Tobecome a trading member, securities firms must be licensed by the StateSecurities Commission with a certificate of satisfaction of conditions forderivatives brokerage, while a commercial bank must have the central bank’sapproval on investment in derivatives and be a member of the Government bondmarket of the stock exchange in order to be a special trading member.
Itmust not be in the process of a consolidation, merger or dissolution, it mustnot be under control or special control of any Vietnamese authority; and itsoperation must not be subject to suspension or temporary suspension. A firmalso must meet requirements of charter capital, owner equity and businessresults.
Inorder to be a market maker--who is entitled to create a market for one or morederivatives on the basis of a contract with the stock exchange--securitiesfirms or commercial banks must satisfy clearing member conditions.
Clearingmember can clear and settle transactions for their own account and for itsbrokerage clients.
Inaddition, members must satisfy the stock exchange’s requirements on ITinfrastructure and professional rules for derivatives trading.
OnMarch 24, the Hanoi Stock Exchange issued regulations on membership of thederivatives market, with detailed requirements on IT infrastructure and applicationprocedures.
Accordingto the new rules, securities companies and commercial banks need to have theirIT infrastructure connected to the stock exchange and ensure connection withthe stock exchange’s derivatives trading system.
Theyalso must install software to serve registration procedures, transactions,settlement. Securities firms must have websites to disclose derivatives tradingas well as information of companies.
Forentities whose membership is terminated by the stock exchange, the time neededto re-register is two years in case of voluntary termination and three years incase of compulsory termination.
Theregulation also stipulates rights and obligations of members. Securities firmshave the right to receive the information provided under the contract signedwith the stock exchange while banks can connect and perform transactions on thestock exchange’s trading system as well as use the services provided forspecial trading members.
Applicantsto become market makers must test the function of listing prices and signcontracts with the stock exchange and register account for market makers.
Inaddition, the new regulations provide details on reporting regimes anddisclosure requirements for each type of member, as well as settlement disputesand punishment for violations.
“Withthis regulation issue, legislation related to market members has been basicallycompleted and ready to open its door for derivative market operation,” thenorthern stock exchange said in a statement.
After 16 years of operation, the domestic stockmarket has only stocks, bonds and fund certificates commonly traded. Theestablishment of derivatives market is expected to provide modern products forinvestors and boost the local market toward greater development.
VNA
