Vietnam’s Derivatives Market Continues Steady Development

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exchange-1-300x212By Charles Small, Senior Associate, Dezan Shira & Associates

Decree 42/2015/ND-CP on the derivatives market has been issued by the Prime Minister. According to the new regulations, which will become valid in July, companies trading derivatives for profits in Vietnam must have chartered capital of at least VND600 billion (US$27.5 million).

Brokerage firms are to be permitted to trade in derivatives for profit, and must have chartered capital of at least VND800 billion (US$36.7 million) in chartered capital.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Pre-Investment, Market Entry Strategy Advisory

In order to become a direct clearing firm, commercial banks are required to have equity of at least VND5 trillion (US$229.3 million), and securities firms at least VND900 billion (US$41.2 million). To become a direct clearing member, commercial banks’ required equity amount is VND7 trillion (US$321.0 million), and for securities firms, the minimum is VND1.2 trillion (US$55.0 million). An estimated 15-20 firms meet the requirements.

Several requirements from the Ministry of Finance apply to disposable capital, professional procedures, and profit.

In Vietnam, derivatives trading activities are only permitted in stock exchanges. Only futures, options, forwards and other contracts of which underlying assets are securities are recognized. Derivatives have been recognized in Vietnam since the Securities Law of 2006.

Related Link Icon-VBRELATED: State Bank of Vietnam Issues New Regulations for 2015

Under Prime Ministerial Decision No. 366/QD-TTg of 2014, Vietnam’s derivatives market development is taking place according to the following timeline:

2013-2015: Create a legal framework and complete physical and technological infrastructure for derivatives market development, including systems of derivatives trading, clearing and settlement; disclosure and monitoring at stock exchanges; securities depositories and market members; compatibility with basic derivatives products and preparing necessary conditions for an operational market.

2016-2020: Operate the derivatives market for derivatives products based on securities indices, government bonds and stocks.

After 2020: Improve the quality of the derivatives market, diversify traded products, expand market participants, improve technological infrastructure, and improve investor base quality. The ultimate aim is to form a unified derivatives market in conformity with international practices, operating effectively, publicly, and transparently.

Vietnam has an outward-looking policy of consulting with international partners when formulating derivatives regulations. As a part of an initiative funded by the UK’s Prosperity Fund for the State Securities Commission of Vietnam (SSC) to develop the country’s derivatives market, workshops have taken place involving representatives from financial institutions, the SSC, and the Hanoi and Ho Chi Minh Stock Exchanges.


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