What is principle of determining the settlement price at the end of day for Index Futures Contract at the Vietnam Securities Depository?

What is principle of determining the settlement price at the end of day for Stock Index Futures Contract at the Vietnam Securities Depository?

Pursuant to Section 1, Appendix 8 Method of determining settlement price at the end of day, issued together with the Regulation on clearing and settlement of derivative securities transactions, Decision 61/QD-VSD in 2022 on principles of price settlement determination at the end of the day for Stock Index Futures Contract and Government bond Futures Contract at the Vietnam Securities Depository as follows:

a. The price of futures futures transactions at the opening periodic order matching session and the prices of put-through futures transactions are established during the day when determining DSP by the weighted average method of trading volume.

b. DSP is rounded and taken to two decimal.

What is determination of the order of precedence of settlement price at the end of day for Index Futures Contract at the Vietnam Securities Depository?

According to Section 2, Appendix 8 Method of determining settlement price at the end of day, issued together with the Regulation on clearing and settlement of derivative securities transactions, Decision 61/QD-VSD in 2022 regulating the settlement price at the end of day for Index Futures Contract at the Vietnam Securities Depositoryare determined in order of priority at the Vietnam Securities Depository as follows:

a. Closing price of the periodic closing order matching session.

b. The price is determined by one of two methods as follows:

(i) Volume-weighted average price (VWAP) is prioritized for selection in the following order:

- VWAP of all matched index futures contracts in the last 30 minutes of a continuous order matching session if there are more than 20 matched transactions in this period ;

- VWAP of matched index futures contracts among the 20 matched transactions at the end of the continuous matching session after removing the highest and lowest prices if in the last 30 minutes of the matching session continuously have 20 or less transactions matched, not eliminated in case of more than 01 transaction with the same highest or lowest price;

- VWAP of all matched index futures contracts at a continuous matching session if less than 20 transactions are matched during the day.

(ii) In case the VWAP price cannot be determined, DSP is the opening price of the opening periodic order matching session.

c. For futures contracts with far-maturity month, there are no transactions, but futures contracts with the latest expiration month have transactions, and at the same time, both types of contracts have transactions in previous days, the price is determined for futures contracts with expiration months according to the formula:

DSP_t = DSP _{nearest t} + (DSP_t-1 - DSP _nearest t-1)

In there:

DSP_t : is the settlement price at the end of the day of the futures contract to be calculated;

DSP _{nearest t} : is the DSP of the futures contract with the nearest maturity month;

DSP _nearest t-1 : is the DSP of the futures contract with the nearest expiration month at the previous trading day;

DSP_t-1: is the DSP of futures contract to be calculated at the previous trading day.

d. DSP of the previous trading day (not applied continuously within 03 trading days).

e. The theoretical price is determined according to the following formula:

 

In there:

S: Reference value of the underlying index in the current trading day, rounded to 2 decimal places;

r: is the interest rate of government bonds with one-year remaining term on the yield curve of HNX;

t: Number of days from the date of calculation to the last transaction date;

Di : Dividend index of the futures contract;

Divi : total cash dividends of component stocks in the index in the preceding trading year;

MC: Reference market capitalization of the index during the trading day (= ∑ (Closing price of a component stock x Number of issues of that stock).

What is determination of the order of precedence of settlement price at the end of the day for Government bond futures contract in Vietnam?

In Section 3, Appendix 8 Method of determining settlement price at the end of day, issued together with the Regulation on clearing and settlement of derivative securities transactions, Decision 61/QD-VSD in 2022 regulating the settlement price at the end of the day for Government bond futures contract are determined in the order of priority as follows:

a. The price is determined by one of two methods as follows:

(i) Volume-weighted average price (VWAP) is prioritized for selection in the following order:

- VWAP of all matched government bond futures transactions in the last 30 minutes of a continuous order matching session if there are more than 10 matched transactions during this period.

- VWAP of G-bond futures transactions that match orders out of 10 matched transactions at the end of the continuous matching session after removing the highest and lowest prices if in the last 30 minutes of the continuous order matching session there are 10 or less transactions matched, not removed in case there are more than 01 transaction with the same highest or lowest price.

- VWAP of all G-bond futures transactions matched at a continuous matching session if less than 10 transactions were matched during the day.

(ii) In case the VWAP price cannot be determined, DSP is the opening price of the opening periodic order matching session.

b . For government bond futures contracts with a distant maturity month, there are no transactions, but government bond futures contracts with the latest maturity month have transactions, and at the same time, both types of contracts have transactions in previous days, the price is determined for government bond futures contracts has a distant maturity month according to the formula:

DSP _t = _{Nearest DSP t} + (DSP _t-1 - _{Nearest DSP t-1} )

In there:

DSP _t : is the settlement price at the end of the day of the Government bond futures contract to be calculated;

_{The nearest} DSP t : is the DSP of the Government bond futures contract with the nearest maturity month;

_{The nearest} DSP t-1 : is the DSP of the Government bond futures contract with the nearest expiration month at the previous trading day;

DSP _t-1 : is the DSP of the Government bond futures contract to be calculated at the previous trading day.

c. DSP of the previous trading day (not applied continuously within 03 trading days).

d. The theoretical price is determined according to the following formula:

In there:

CF: Conversion factor of the cheapest bond to deliver;

C _t : The market price of the cheapest bond to deliver;

c: the coupon of the cheapest bond to deliver;

t _o : coupon payment date of the delivered bond;

t: calculation date;

r: is the interest rate of government bonds with one-year remaining term on the yield curve of HNX;

T: the maturity date of the futures contract;

Tt: the remaining time of the futures contract (days);

actual: The actual number of days of the calculated year.

What is the cheapest bond to deliver at the Vietnam Securities Depository?

According to the provisions in Appendix 8 Method of determining settlement price at the end of day, issued together with the Regulation on clearing and settlement of derivative securities transactions, Decision 61/QD-VSD in 2022, providing for the determination of cheap bonds for delivery at the Vietnam Securities Depository Center as follows:

CTD = min (Market price of the bond delivered/CF)

CTD bonds are bonds that bring the biggest profit/smallest loss when implementing the strategy of buying bonds and selling futures contracts and then closing the position at the maturity date. The loss/gain when implementing the above strategy is calculated by the difference in payment value.

Best Regards!