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Official Gazette

Saturday, September 23, 2017

Amendments on derivative securities introduced

Updated: 15:50’ - 31/03/2017
In order to address existing problems in the development of the derivatives market, the Ministry of Finance on March 16 issued Circular No. 23/2017/TT-BTC amending Circular No. 11 dated January 19, 2016.

Effective on May 1, the new circular additionally defines a total trading account as an investor’s transaction account in which buying and selling positions for a future contract remain open until the securities company makes clearing for the transactions at the request of, or in negotiation with, the investor.

At the same time, the investor is required to make sure the positions on his transaction account are within the limit set in the Regulation issued by the Vietnam Securities Depository (VSD). If the positions exceed this limit, the investor must conduct counter transactions to reduce the value of positions and make an additional deposit within the time limit stated in the VSD’s Regulation.

If the investor fails to reduce the value of positions within the specified time limit, a clearing company will carry out counter transactions to close part or the whole of the investor’s positions or the VSD will do so if the clearing company fails to conduct such transactions.

The circular enables fund management firms to open one total trading account for entrusted domestic investors and another for entrusted foreign investors. It also permits securities companies set up overseas to open one total trading account for providing derivatives brokerage services for foreign investors.

Under the new regulation, clearing companies are allowed to open deposit accounts in their names for investors at commercial banks and use these accounts for their trading activities. However, the deposits come under the ownership of investors but not clearing companies.

For the settlement of position profits or losses, the circular says the to-be-settled value of a position profit or loss will be determined on a daily basis.

With regard to contract settlement, the new circular states that if the settlement is made in cash, it will be completed upon finishing the settlement of the last trading day’s position profits/losses. If the settlement is conducted through asset transfer, the seller must hand over the assets and the buyer must pay cash as required in the contract and VSD’s Regulation.- (VLLF)
 

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