Requirements for issuance of certificate of eligibility to trade derivatives in Vietnam

Requirements for issuance of certificate of eligibility to trade derivatives in Vietnam (Internet image)

1. What is derivative trading?

According to Clause 1, Article 3 of Decree 158/2020/ND-CP, derivative trading means the conduct of one, several or all of the following operations: derivative brokerage, derivative proprietary trading, and derivative investment consulting.

2. Requirements for issuance of certificate of eligibility to trade derivatives in Vietnam

Securities companies and securities investment fund management companies (hereinafter referred to as “fund management company”) shall only trade derivatives after obtaining certificate of eligibility to trade derivatives from the State Securities Commission of Vietnam (“SSC”):

- Securities companies may carry out one, several or all of derivative trading operations, including: derivative brokerage, derivative proprietary trading and derivative investment consulting;

- Fund management companies may only provide derivative investment consulting.

Specifically, in Clause 2, Article 4 of Decree 158/2020/ND-CP, in order to be issued with certificate of eligibility to trade derivatives, a securities company is required to meet the following requirements:

- Be sufficiently licensed to perform securities trading operations;

- Meet the following charter capital and equity requirements:

= For derivative brokerage: the minimum charter capital or equity is VND 800 billion;

= For derivative proprietary trading: the minimum charter capital or equity is VND 600 billion;

= For derivative investment consulting: the minimum charter capital or equity is VND 250 billion;

= If a securities company engages in all of derivative brokerage, derivative proprietary trading and derivative investment consulting, its minimum charter capital or equity is VND 800 billion;

- Meet internal control and risk management requirements for securities trading operations in accordance with regulations of law on operations of securities companies;

- Meet personnel requirements: Director (General Director), Deputy Director (Deputy General Director) in charge of specific operations and at least 05 employees for each derivative trading operation must have securities professional certificates suitable for their operations as prescribed by law and professional certificate in derivatives and derivative market;

- Maintain a working capital ratio of at least 220% in the last continuous 12 months; have sufficiently contributed to provisions as prescribed by law;

- Incur no loss in the last 02 years;

- Receive unqualified opinions from the accredited audit organizations for the latest audited annual financial statements and the latest reviewed mid-year financial statements (in case an application for certificate of eligibility to trade derivatives is submitted after June 30);

- It is not following procedures for reorganization, dissolution or bankruptcy; it is not subject to any decision on suspension of business operations issued by competent authorities.

In order to be issued with certificate of eligibility to trade derivatives, a fund management company in Vietnam is required to meet the following requirements:

- Maintain the charter capital or equity of at least VND 25 billion;

- Arrange Director (General Director) and Deputy Director (Deputy General Director) in charge of specific operations and at least 05 employees for derivative investment consulting who must have securities professional certificates suitable for their operations as prescribed by law and professional certificate in derivatives and derivative market;

- Meet the requirements in Points dd, e, g, h Clause 2 of Article 4 of Decree 158/2020/ND-CP.

(Article 4 of Decree 158/2020/ND-CP)

Thanh Rin

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