What are the cases of insolvency at the Vietnam Securities Depository?

What are the cases of insolvency at the Vietnam Securities Depository?

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 stipulating cases of insolvency at the Vietnam Securities Depository as follows:

1. Clearing members and investors being customers of clearing members become insolvent when falling into one of the cases specified in Clause 1, Article 15 of Circular 58/2021/TT-BTC.

2. The handling of insolvency cases specified at Point a, Clause 1, Article 15 of Circular 58/2021/TT-BTC shall comply with Article 25 of this Regulation, in which:

a. The time to close the balance of the member's current deposit account at NHTT to determine the position's ability to pay profit and loss, to pay money when performing the contract of the clearing member is 09:30 on the payment day.

b. 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 as prescribed in Clause 5, Article 21 of this Regulation is 11:00 on the payment day.

3. The handling of cases where clearing members become insolvent as prescribed at Point b, Clause 1, Article 15 of Circular 58/2021/TT-BTC shall be handled as follows: Within 01 working day from the date of receiving the clearing member's report or the competent authority's notice of the clearing member's insolvency, VSD proposes a handling plan for each specific case in accordance with Decree 158/2020/ND-CP, Circular 58/2021/TT-BTC and report to the State Securities Commission for approval before implementation.

4. The handling of cases where clearing members become insolvent under the provisions of Point c, Clause 1, Article 15 of Circular 58/2021/TT-BTC shall be handled as follows: VSD reports to the SSC on a case-by-case basis before implementation.

What are solutions when clearing members become insolvent at the Vietnam Securities Depository?

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 solutions when clearing members become insolvent at the Vietnam Securities Depository as follows:

1. When clearing members become insolvent, VSD will apply 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 of Circular 58/2021/TT-BTC .

2. 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 deposits of insolvent clearing members and client deposits of insolvent clearing members :

- When a clearing member becomes insolvent, even if the investor is a customer of a clearing member , VSD will check the money on the margin deposit account at Vietcombank and request the Bank to make a transfer to the payment deposit account to fulfill the payment obligation of the clearing member.

- In case an investor is a customer of a clearing member who is insolvent and the margin deposit account is not enough to fulfill the payment obligation, VSD will check the customer's margin deposit balance on VSD's system and request the Bank to transfer funds from the customer's escrow account to the current deposit account within the scope of the investor's payment obligation to fulfill the clearing member's payment obligation. The use of support in this case is only applicable 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 insolvent clearing members :

- VSD will check the balance of the existing contribution to the Clearing Fund, after deducting the unreimbursed support (if any), of the clearing member who is insolvent and request the Bank to make a transfer to the payment deposit 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 the process of being processed to cancel the membership in accordance with the Regulations on management and use of the Clearing Fund of VSD) according to the following principles: :

- VSD will determine the amount of money that the insolvent clearing member (TVm) owes to fulfill its payment obligations and determine the amount of contributions to the Clearing Fund that other clearing members have (TVk needs support according to the following formula:

TV support amount _k = S _k × Amount owed

With:

S k	=	TV's donation k
		Total clearing fund at the time of use (*)	-	TV's contribution amount m

(*) 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 amount to the current deposit account to pay for the obligations of the insolvent clearing member . promptly notify the relevant clearing member of 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 interest on the use of the clearing fund in accordance with the provisions of the Regulation on management and use of the clearing fund of VSD.

d. Use VSD's professional risk prevention fund and lawful capital sources as prescribed at Points d, dd, Clause 2, Article 15 of Circular 58/2021/TT-BTC .

3. Send a notice to the Hanoi Stock Exchange requesting to suspend the receipt of trading orders in order to open a new position for the trading account and the insolvency account of the clearing member's customers (if any). according to the provisions of point b, clause 3 and point b, clause 4, article 15 of Circular 58/2021/TT-BTC .

4 . Closing positions and liquidating positions of clearing members and clients of clearing members in case clearing members become insolvent as prescribed in Clause 5, Article 28 of Decree 158/2020/ND-CP implemented by VSD as follows :

a. VSD is entitled to request an insolvent clearing member to perform a reciprocal transaction to close a part of a position or liquidate the entire position in the name of the clearing member or request another clearing member to do the same.

b. In case a clearing member becomes insolvent and 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 attached to it. 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 can 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 the transactions. reciprocal command. After the transaction is successful, the counter 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.

5. The transfer of escrow and open positions of customers from the insolvent clearing member to the replacement clearing member in accordance with the provisions of Point dd Clause 5 Article 28 of Decree 158/2020 / Decree-CP shall be implemented according to the guidance in Article 29 of this Regulation.

6. Insolvency clearing members are handled for violations in accordance with regulations and are responsible for returning VSD of all used assets from the clearing fund, professional risk reserve fund and other sources. to ensure 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.

7 . The sale of escrow assets, contributions to the Clearing Fund by securities of an insolvent clearing member in order to repay the used resources and offset the costs of financial losses incurred (if any) in the process of handling insolvency as prescribed in Clause 5, Article 15 of Circular 58/2021/TT-BTC by VSD as follows:

a. VSD sells margin securities and contributed securities to the Clearing Fund of insolvent clearing members on the Stock Exchange through a designated trading member or transfers ownership not through the trading system of the Stock Exchanges at the price decided by VSD or competitively auctioned or offered for sale.

b. The transfer of securities payment is made directly from the Securities Depository 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 the sale of securities through a designated trading member shall be recorded into the deposit account of VSD opened at N payment lines of the underlying securities market. In other cases, the proceeds are recorded into VSD's deposit account at the derivatives clearing bank.

c. The money collected as prescribed at Point b of this Clause shall be used by VSD to fulfill the financial obligations of the insolvent clearing member, to refund the used sums as prescribed at Point c, d Clause 2 of this Article and to compensate for other financial losses caused by the insolvent 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 receiving account registered by the clearing member with VSD.

What is the position limit at the Vietnam Securities Depository?

Pursuant to Clause 1 Article 26 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 position limit at the Vietnam Securities Depository as follows:

VSD applies position limits to each investor's trading account by account type (individual investors, institutional investors, professional securities investors) and by futures contract type. VSD coordinated with the Vietnam Stock Exchange to determine the position limit for each subject and approved by the State Securities Commission. Position limits are announced by VSD on VSD's website at least 30 days before application.

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