What are regulations on the deposit to secure the implementation of futures contracts on government bonds (Delivery Margin - DM) and Variable Margin (VM) in Vietnam ?

What are regulations on the deposit to secure the implementation of futures contracts on government bonds (Delivery Margin - DM) in Vietnam?

Pursuant to Clause 2, Article 5 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 the deposit to secure the implementation of futures contracts on government bonds (Delivery Margin - DM) in Vietnam as follows:

2. Deposit to secure the implementation of futures contracts on government bonds (Delivery Margin - DM)

2.1. Margin to secure the performance of a G-bond futures contract is the margin value that clearing members of the seller and clearing members of the buyer must maintain from the last trading day (date E+1) to the final payment date. (E+3) to secure the contract performance obligation, instead of the initial deposit as prescribed in Clause 1 of this Article.

2.2. Form of deposit to ensure the implementation of futures contract

a. Deposit in cash

Clearing members pay a deposit in cash to VSD's member deposit account at NHTT. The margin value is determined based on the margin ratio to secure the performance of the futures contract, the number of contracts to mature, the final settlement price and the contract's multiplier according to the instructions in Appendix 2 issued together. This Regulation.

The margin ratio to secure the implementation of the Government bond futures contract is published on VSD's website at least 02 working days before application.

b. Deposit with bonds in the list of transferable bonds.

Clearing members shall deposit margin bonds into the member's trading account for each Government bond futures contract on the following principles:

- Submit only 01 bond code in the list of transferable bonds;

- The number of bonds to be deposited as escrow is equal to 100% of the number of bonds to be transferred.

These bonds will be managed by VSD separately from other margin securities.

c. Clearing members of the buyer must pay a deposit to secure the performance of the futures contract in cash. The seller's clearing member is entitled to pay a security deposit for the performance of the Government bond futures contract in cash or in bonds in the list of transferable bonds.

What are regulations on Variable Margin (VM) in Vietnam?

Pursuant to Clause 3, Article 5 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 Variable Margin (VM) in Vietnam as follows:

3. Variable Margin (VM)

a. Variable margin is determined on the basis of position profit and loss in the trading session of open positions on an investor's trading account as follows:

- For existing positions on the account: It is the difference between the transaction price updated in the trading session (except the price of the put-through transaction) and the settlement price at the end of the day of the previous trading day (for the position has been on the account since the end of the previous trading day), or at the settlement price for opening the position (for a position just opened during the day);

- For a closed position within the day: The difference between the closing settlement price of the position and the closing price of the previous trading day (for positions already on the account from the end of the previous trading day), or with the settlement price for opening the position (for positions opened during the day).

b. The variable margin value is only included in the required maintenance margin value in the event of a loss or loss of the portfolio's position on the investor's account.

What are regulations on Margin Requirement (MR) and calculation of MR in Vietnam?

Pursuant to Clause 2, Article 5 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 Margin Requirement (MR) in Vietnam as follows:

4. Margin Requirement (MR)

a. The required maintenance margin is the total margin value that a clearing member is obligated to pay to maintain positions in the clearing member's name calculated during the trading session for the position portfolio on each account. The investor's transaction and the clearing member's own account include the following margin values:

- Initial deposit.

- Deposit to secure the performance of futures contracts on government bonds in the manner specified at Point a, Clause 2.2 of this Article (applicable only to futures contracts that have not yet been submitted with transferable bonds to fulfill payment obligations).

- Variable margin.

b. An investor's trading account is only allowed to open more positions when the account's margin usage ratio is below the level 3 warning threshold. If this ratio falls within the level 3 warning threshold, the trading account will Investors' transactions will be suspended and clearing members must reduce their positions through opening a new reciprocal position to close an existing position or submit additional collateral to VSD. Regulations on warning thresholds and handling of violations of warning thresholds shall comply with the provisions of Article 13 of this Regulation.

Best regards!