Vietnam’s regulations on market makers

Decree No. 95/2018/ND-CP of Vietnam’s Government provides regulations on market makers as follows:

Eligibility requirements to be satisfied when applying for registration as a market maker:

- The applicant must be a commercial bank or a securities company which is duly established and operates under the law of Vietnam;

- Its owner’s equity reported on duly audited financial statements of 03 years preceding the year in which application for registration as a market maker is submitted must be not lower than the minimum charter capital prescribed by relevant laws;

- It has operated for at least 03 years. If it is an acquiring enterprise or an enterprise formed from full or partial division or consolidation, its operating period shall include the operating period before the acquisition, full or partial division or consolidation.

- It has purchased and traded government debt instruments on the primary and secondary market with the quantity prescribed by the Ministry of Finance in each period.

Application for registration as a market maker:

- The application form for registration as a market maker using the Form No. 01 stated in the Appendix enclosed with Decree No. 95/2018/ND-CP.

- The copy of the business registration certificate.

- Financial statements, which have been duly audited by an independent audit firm operating under the law of Vietnam, of 03 years preceding the year in which application for registration as a market maker.

- The report on transactions conducted on primary and secondary market made according to the Form No. 02 stated in the Appendix enclosed with Decree No. 95/2018/ND-CP.

Procedures for accreditation of a market maker:

- Within the period from November 01 to November 10 every year, any institution that satisfies eligibility requirements for registration as a market maker and wishes to become a market maker shall submit an application to the Ministry of Finance.

- Within 05 working days from the receipt of the application, the Ministry of Finance shall consider and verify the adequacy and legality of the received application, and request the application in writing to supplement the application (if any).

- Upon the receipt of a satisfactory application and based on the applicant’s satisfaction of the requirements specified above, the Ministry of Finance shall select and announce the list of qualified market makers by December 31 every year. If an application is refused, the Ministry of Finance shall send a written notification, which indicates reasons for refusal, to the applicant.

Requirements to be satisfied for maintaining a market maker status:

- The market maker must maintain its satisfaction with the requirements specified above.

- It must fulfill obligations of a market maker specified in Clause 2 Article 27 of Decree No. 95/2018/ND-CP.

Process of evaluating the maintenance of eligibility by a market maker:

- Within the period from November 01 to November 10 every year, the market maker shall submit a report, which is made according to the Form No. 03 stated in the Appendix enclosed with Decree No. 95/2018/ND-CP, on its operating results on the market for the reporting period from November 01 of the previous year to October 31 of the current year, to the Ministry of Finance.

- Based on the market maker’s report and the Ministry of Finance’s database, the Ministry of Finance shall evaluate the maintenance of eligibility by the market maker and announce evaluation results by December 31 every year. If a market maker fails to satisfy eligibility requirements, the Ministry of Finance shall send a written notification, which indicates reasons for refusal, to that market maker.

Ranking of market makers:

- Based on a market maker’s operating results on the primary and secondary market, and the proportion of each evaluation criterion in each period, the Ministry of Finance shall annually evaluate and announce that market maker’s rank.

- Based on the market developments, the Ministry of Finance shall use the ranking results to allow a market maker to maintain its status.

Rights and duties of a market maker:

A market maker shall have the following rights:

- Being the sole entity entitled to participate in issues, repurchases or swaps of government debt instruments by bidding;

- Being given priority in application for registration as a lead underwriter in each issue of government bonds or national development bonds through underwriting;

- Attending periodic exchanges about bond issuance and orientations for bond market development policies with the Ministry of Finance;

- Request the State Treasury to issue government bonds for ensuring the market liquidity as prescribed in Article 20 of Decree No. 95/2018/ND-CP;

- Being given priority in negotiation on repurchase or swap of government debt instruments according to the Ministry of Finance’s notification.

A market maker must discharge the following duties:

- Bid at bidding sessions for government debt instruments according to the Ministry of Finance's notification in each period;

- Annually purchase (including for customers) and trade in government debt instruments on the primary and secondary market with the quantity prescribed by Ministry of Finance in each period;

- Fulfill duties according to firm commitments to offer daily bid and ask prices of standard debt instruments according to the Ministry of Finance’s notification in each period;

- Make full payment for government debt instruments purchased on the agreed schedule;

- Submit annual reports and 6-month reports, made according to the Form No. 03 and Form No. 04 stated in the Appendix enclosed with Decree No. 95/2018/ND-CP.

Terminating eligibility of a market maker

The eligibility of a market maker shall be taken into consideration for termination in the following cases:

- The market maker has its business license revoked or withdrawn;

- Its business is suspended or it is dissolved or declared bankrupt;

- Its business is put under a special control by a competent authority;

- It submits an application for voluntary termination of its eligibility;

- It fails to satisfy the eligibility requirements as specified in Clause 4 Article 26 of Decree No. 95/2018/ND-CP.

According to regulations, the Ministry of Finance shall inform the market maker in writing of its eligibility termination, and publish information concerning such eligibility termination on its website.

A market maker whose eligibility is terminated in the cases where it submits an application for voluntary termination of its eligibility or it fails to satisfy the eligibility requirements as specified in Clause 4 Article 26 of Decree No. 95/2018/ND-CP shall not apply for registration as a market maker within 02 years from the date of eligibility termination.

More details can be found in Decree No. 95/2018/ND-CP of Vietnam’s Government, which takes effect from July 01, 2018.

-Thao Uyen-

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