How to handle the case of insolvency clearing members in Vietnam in derivative securities born at the Vietnam Securities Depository from June 1, 2022?
What is a clearing member?
Clearing member is a securities company, commercial bank, foreign bank branch, which has been granted a Certificate of eligibility to provide clearing and settlement services by the State Securities Commission by the State Securities Commission. Vietnam Securities Depository and Clearing Corporation approved to become a clearing member.
How to handle the case of insolvency clearing members in Vietnam in derivative securities born at the Vietnam Securities Depository from June 1, 2022?
Cases of insolvency in Vietnam in the regulation on clearing and settlement of derivatives transactions at the Vietnam Securities Depository Center from June 1, 2022?
Pursuant to Article 24 of the Regulation on clearing and settlement of derivatives transactions at the Vietnam Securities Depository, issued together with Decision 61/QD-VSD in 2022, regulating insolvency cases in Vietnam. Vietnam as follows:
- Clearing members, investors who are customers of clearing members become insolvent in Vietnam when they fall into one of the "cases" specified in Clause 1, Article 15 of Circular 58/2021/TT-BTC:
Article 15. Handling of insolvency cases
1. Clearing members, investors being customers of clearing members become insolvent when falling into one of the following cases:
a) Failure to promptly perform or incompletely perform the obligation to pay for position loss or the obligation to pay the compensation as prescribed at Point c, Clause 4, Article 11 of this Circular, or the obligation to pay money when perform contracts according to regulations of Vietnam Securities Depository and Clearing Corporation;
b) Being bankrupt or declared bankrupt in accordance with the law on enterprise bankruptcy;
c) Other cases according to regulations of Vietnam Securities Depository and Clearing Corporation.
- The handling of insolvency cases in Vietnam according to the provisions of Point a, Clause 1, Article 15 of Circular 58/2021/TT-BTC, shall comply with the provisions of Article 25 of this Regulation, in which:
+ The time to close the balance of the deposit, payment, member at NHTT, to determine the solvency, profit and loss of the position, pay money when performing the contract of the clearing member, is 09:30 on the payment day.
+ The time to close the balance of the member's current deposit account at Vietcombank to determine the clearing member's ability to pay money according to the provisions of Clause 5, Article 21 of this Regulation is 11:00 on the day of payment.
- The handling of the case of insolvency of clearing members in Vietnam according to the provisions of Point b, Clause 1, Article 15 of Circular 58/2021/TT-BTC, shall be carried out as follows: Within a period of 01 working day from the date of payment. From the date of receipt of the clearing member's report or the competent authority's notice of insolvency in Vietnam of the clearing member, VSD proposes a handling plan for each specific case. in accordance with the provisions of Decree 158/2020/ND-CP, Circular 58/2021/TT-BTC and report UBCKNN for approval before implementation.
- The handling of cases ofclearing members insolvency according to point c, clause 1, Article 15 of Circular 58/2021/TT-BTC are carried out as follows: VSD reports to the State Securities Commission on a case-by-case basis. specific before implementation.
Measures to handle when clearing members are insolvent in Vietnam?
Pursuant to Article 25 of the Regulation on clearing and settlement of derivatives transactions at the Vietnam Securities Depository, issued together with Decision 61/QD-VSD in 2022, stipulating handling measures when clearing members insolvency in Vietnam as follows:
- When the "clearing member" becomes insolvent, VSD will apply the handling measures as prescribed in Clause 5, Article 28, Clause 1, Article 35 of Decree 158/2020/ND-CP and clauses 2,3 ,4,5 Article 15 Circular 58/2021/TT-BTC.
- The use of support sources as prescribed in Clause 2, Article 15 of Circular 58/2021/TT-BTC to ensure payment when clearing members or investors become insolvent is done as follows:
a. Using deposit of insolvent clearing member and client's deposit of insolvent clearing member:
+ When the "clearing member" becomes insolvent, even if the investor is a customer of the "clearing member", VSD will check the money on the proprietary margin deposit account at the Bank and request the Bank to make a transfer to the deposit payment account to fulfill the payment obligation of the clearing member.
+ In case investor who is customer of clearing member is insolvent but the self-trading margin deposit account is not enough to fulfill payment obligations, VSD will check the balance of escrow deposit customers on VSD's system and request the Bank to transfer from customer's escrow deposit account to deposit payment within the investor's payment obligation to fulfill the payment obligation of clearing member . The use of support in this case is only applied when the "clearing member" has identified and notified VSD specifically that the investor is insolvent.
b. Use of monetary contributions to the Clearing Fund of insolvencyclearing members:
+ VSD will check the balance of existing contributions to the Clearing Fund, after deducting the unpaid support (if any), of the clearing member who is insolvent and request the Bank to transfer to the deposit payment account to fulfill the payment obligation of the clearing member.
c. Use the monetary contribution to the Clearing Fund of other "clearing members" (excluding the clearing member's contribution to the Clearing Fund which is in process of being processed to cancel the membership in accordance with regulations) in the Regulation on management and use of the Clearing Fund of VSD) according to the following principles:
+ VSD will determine the amount owed by an insolvent "clearing member" (TVm) to fulfill its payment obligation and determine the amount of contributions to the Clearing Fund that other "clearing members" ( TVk) needs support according to the following formula:
(*) does not include interest on deposits and interest on the use of clearing funds that have not been allocated to the contribution balance of clearing members.
+ After determining the amount of money that other "clearing members" need to support, VSD will request the TT Bank to transfer the money to a current deposit account to pay for the obligations of the insolvent clearing member . promptly notify the relevant clearing member of the details of the use of money contributed to the Clearing Fund to support settlement on the same day as the Fund is used.
+ Clearing members who are insolvent must bear interests for using the Clearing Fund in accordance with the Regulations on management and use of the Clearing Fund of VSD.
d. Using the "Professional Risk Prevention Fund and VSD's lawful capital sources" according to the provisions at Points d, dd, Clause 2, Article 15 of Circular 58/2021/TT-BTC.
- Send a notice to the Hanoi Stock Exchange requesting to suspend the receipt of trading orders in order to open new positions for proprietary trading accounts and insolvent accounts of clearing members (if any) according to specified at point b, clause 3 and point b, clause 4, Article 15 of Circular 58/2021/TT-BTC.
- Close positions, liquidate positions of clearing members, customers of clearing members in cases of clearing members insolvency according to the provisions of Clause 5, Article 28 of Decree 158/2020/ND- CP is implemented by VSD as follows:
a. VSD has the right to request an insolvent clearing member to perform a reciprocal transaction to close a part of a position or to liquidate the entire position in the name of a clearing member or request another clearing member to act on its behalf. .
b. In case a "clearing member" is insolvent, conducts a reciprocal transaction by himself or herself to close or liquidate a position in his/her name, the "clearing member" must "notify in writing" according to Form 03/PS-TTBT enclosed herewith. This regulation gives VSD detailed information on expected reciprocal trading orders so that VSD can request the Hanoi Stock Exchange to restore transactions on the investor's offending account. Clearing members are fully responsible for the correct execution of counter-trading orders notified to VSD and may send written notices to VSD by fax or email before sending the original documents.
c. In case of requesting another clearing member to act on behalf of the clearing member, VSD will notify the clearing member to replace the details of the positions in the name of the insolvent clearing member that need to be closed or liquidated in order to place other clearing members. reciprocal command. After the transaction is successful, the reciprocal positions will be transferred to the insolvent clearing member for clearing. The request for another clearing member to close or liquidate positions on behalf of the insolvent clearing member is done on the basis of an agreement between VSD and the clearing member.
- The transfer of margin assets and open positions of customers from the insolvent clearing member to the replacement clearing member according to the provisions of Point dd Clause 5 Article 28 of Decree 158/2020/ND -CP is done according to the instructions in Article 29 of this Regulation.
- Clearing members who are insolvent are handled in accordance with regulations and are responsible for returning VSD all the used assets from the clearing fund, the reserve fund for professional risks and other sources for settlement purposes. guarantee payment and bear all related costs (if any). In case a clearing member fails to fully refund within the required time limit, VSD will apply handling measures as prescribed in the Regulations on clearing members.
- The sale of escrow assets, the contribution of the clearing member to the Securities Clearing Fund by the insolvency of clearing members to repay the used resources and offset the costs of financial losses incurred (if any). ) in the process of handling insolvency according to the provisions of Clause 5, Article 15 of Circular 58/2021/TT-BTC implemented by VSD as follows:
a. VSD sells margin securities, "securities" that contribute to the Clearing Fund of insolvent clearing members on the Stock Exchanges through designated trading members or transfers ownership not through the trading systems of other members. Stock Exchange according to the price decided by VSD or auction, competitive offering.
b. The transfer of securities payment is made directly from the Correspondence Account, the securities management account contributing to the Clearing Fund in the name of VSD. The proceeds from the sale of securities in the case of selling securities through a designated trading member is accounted to VSD's deposit account opened at the clearing bank of the underlying stock market. In other cases, the proceeds are recorded into VSD's deposit account at the derivatives clearing bank.
c. The amount of money collected according to the provisions of point b of this clause is used by VSD to fulfill financial obligations of clearing members who are insolvent, refund the used sums as prescribed in points c, d clause 2 of this Article and to compensate for other financial losses caused by the insolvency of the “clearing member” (including transaction, payment, transfer and other costs, if any). The remaining balance (if any) is returned by VSD to the relevant clearing member to the account receiving money by clearing member registered with VSD.
Decision 61/QD-VSD in 2022 takes effect from June 1, 2022.
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