What are operational purposes of the Clearing Fund for derivatives market at the Vietnam Securities Depository?

What are operational purposes of the Clearing Fund for derivatives market at the Vietnam Securities Depository?

In Article 2, Regulations on management and use of clearing funds for derivatives market at the Vietnam Securities Depository Center, issued together with Decision 115/QD-VSD in 2022, stipulating operational purposes of the Clearing Fund for derivatives market at the Vietnam Securities Depository as follows:

The clearing fund is formed from the contributions of clearing members for the purpose of compensating for losses and completing derivative securities transactions in the name of clearing members in case clearing members, investors inability to pay.

What are revenue from the Clearing Fund for derivatives market at the Vietnam Securities Depository?

In Article 3 of the Regulations on management and use of clearing funds for derivatives market at the Vietnam Securities Depository Center, issued together with Decision 115/QD-VSD in 2022, stipulating revenue from the Clearing Fund for derivatives market at the Vietnam Securities Depository is as follows:

1. The minimum initial contribution shall comply with the provisions of Clause 2, Article 16 of Circular No. 58/2021/TT-BTC dated July 12, 2021 of the Ministry of Finance guiding a number of articles of Decree No. 158/ 2020/ND-CP dated December 31, 2020 of the Government on derivative securities and derivative securities market (hereinafter referred to as Circular No. 58/2021/TT-BTC).

2. The periodical additional contribution is determined monthly on the basis of re-evaluating the size of the Clearing Fund according to the following principles:

a) The size of the Clearing Fund is assessed on the basis of the transaction price data of futures contracts for at least 252 trading days. The determination of the size of the Clearing Fund is based on transaction data on the derivatives market, the level of market risk and the method of stress test mentioned in Appendix 1 issued together . This Regulation.

b) VSD requires clearing members to make additional contributions to the clearing fund when the total value of assets contributed to the clearing fund at the time of assessment is smaller than the size of the clearing fund determined under Point a of this clause and not enough to ensure solvency in case there are 02 clearing members with the largest total position loss at any 01 settlement day in the calculation period and at the same time lose their ability to pay. The specific contribution level of each clearing member shall be determined according to the provisions in Appendix 1 issued together with this Regulation.

c) The value of assets contributed to the Clearing Fund at the time of assessment is determined on the basis of the discount rate of securities contributed to the Clearing Fund and the value of assets contributed to the Clearing Fund is valued in accordance with regulations on Valuation of collateral assets specified in the Regulation on clearing and settlement of derivatives transactions at VSD.

3. Extraordinary additional contributions shall comply with the provisions of Point b, Clause 1, Article 16 of Circular No. 58/2021/TT-BTC and on the following principles:

a) In case a clearing member is placed in a warning state in accordance with the securities law on financial safety and the banking law on capital adequacy: Within 01 working day from from the date of receiving the written notice of the competent authority or the written report, disclosure of information of the clearing member about being placed in a state of alert (whichever comes first), VSD shall currently re-evaluating the size of the Clearing Fund to determine and request the clearing member to make extraordinary additional contributions in case the contribution obligation requested to be redefined is larger than the required contribution obligation in the most recent month. Clearing members who are placed on alert must complete the extraordinary additional contribution within 01 working day from the date of receiving the written notice of VSD.

b) In case the assets contributed to the Clearing Fund by a clearing member are blocked or confiscated by a competent state agency or by a court decision: Within 1 working day from the date on Upon receiving the notice of VSD, the relevant clearing member is responsible for making an extraordinary additional contribution in cash with a minimum contribution value equal to the difference between the contribution obligation required by VSD in the latest month and value of assets (money and securities) contributed to the Clearing Fund remaining after being blocked or confiscated. The remaining value of securities contributed to the Clearing Fund is valued according to the regulations on valuation of margin assets in the Regulation on clearing and settlement of derivatives transactions at VSD.

c) For other cases: VSD re-determines the size of the Clearing Fund at the time of unusual events and reports to the State Securities Commission for approval of the specific extraordinary contribution. The relevant clearing member is responsible for completing the extraordinary additional contribution in cash within 01 working day from the date of receiving the notice of VSD.

4. Deposit interest arising from the Clearing Fund deposit account at the paying bank is determined according to the demand interest rate announced by the paying bank from time to time.

5. Interests on the use of clearing funds collected from insolvent clearing members shall be determined according to the provisions of Clauses 2 and 3, Article 7 of this Regulation.

What are expenses from the Clearing Fund for derivatives market at the Vietnam Securities Depository? 

In Article 4 of the Regulations on management and use of clearing funds for derivatives market at the Vietnam Securities Depository Center, issued together with Decision 115/QD-VSD in 2022, stipulating expenses from the Clearing Fund for derivatives market at the Vietnam Securities Depository as follows:

1. Spending the value of assets contributed to the Clearing Fund by clearing members for separate management according to the provisions of Article 8 of this Regulation.

2. Pay the difference at the request of clearing members in case the contribution value to the Clearing Fund is greater than the obligation to contribute.

3. Paying the fee for management of the clearing fund deposit account at the paying bank.

4. Paying expenses incurred for handling related operations in case clearing members become insolvent.

Best Regards!